Here’s Matt on the numbers:
I knew Tech has been through this decade, but I was still shocked when I ran the numbers.
61.5% of the S&P 500’s 131.9% return comes from technology.
No other sector even comes close.
Walk into Comm Services and that’s 78.4% of the 131.9% total gain in the S&P 500 coming from just two sectors.
The power laws of the stock market strike again.
The returns on technology stocks may seem to defy logic, but these types of stocks have a history of huge moves – both up And down.
The magnitude of the gains and losses is staggering when you dig into the data.
Here are the calendar year returns for the Nasdaq 100 since 1995:
A number of things stand out from this graph.
Firstly, there have been many more profits than losses. Over the past 31 years, profits have outweighed losses 26 out of 5. That means the Nasdaq 100 has risen in 84% of those years.
The profits are usually large to quite large.
In 1 in 4 years the profit has been 40% or more. Nearly half the years since 1995 have seen gains of 20% or more.
Losses are rare, but when they do happen, it’s no joke.
You will notice that there are only five red numbers for the bad years on the map. Each of these losses was -30% or worse.
These were the five bad years since 1995:
- 2000: -36.1%
- 2001: -33.3%
- 2002: -37.4%
- 2008: -41.7%
- 2022: -32.4%
Remarkably, every year of the past thirty years has been a gigantic loss. In contrast, the S&P 500 has had only one year of losses of 30% or more (in 2008, when the index fell 37%).
It’s also crazy that it was three years after the dotcom bubble ended in a row of losses greater than 30%.
The maximum decline for the S&P 500 was -57%, while the Nasdaq 100 fell more than 80% after the burst of the dot-com bubble and the Great Financial Crisis.
There have been much bigger peaks and valleys in the Nasdaq 100, but investors have been rewarded for those risks.
These are the annual returns since 1995:
- Nasdaq 100 +15.0%
- S&P500 +11.1%
No pain, no gain.
The big question is this: Will the next bad year, whenever it occurs, be this bad?
We will see…
Further reading:
How much will the stock market fall in 2026?
1The Nasdaq 100 does not all technology stocks, but if you include communications services, they currently make up about 70% of the index.
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