The Worst Week Ever

It was a good run. In the five years leading up to the worst week ever, the NASDAQ Composite gained 445%, compounding at 40% a year. For some stocks it was even better. Cisco, Qualcomm and others made the index look like a snail.

But then, in just one week, it all came crashing down.

The daily returns for the NASDAQ Composite for the week ending in April 14th, 2000 were as follows:

  • Monday -5.8%
  • Tuesday -3.2%
  • Wednesday -7.1%
  • Thursday -2.5%
  • Friday -9.7%

In just five days, the index shed a quarter of its value. Qualcomm and Amazon each lost 30%.

The 25% weekly decline, the worst ever for the NASDAQ Composite, was front page news.

As is always the case, the newspaper needing to cite a catalyst, turned to core consumer prices rising more than economists had predicted.

The New York Times spoke to investors who were feeling the pain:

His largest portfolio, at Prudential, had fallen from $1.8 million to under $1 million. Still, Mr. Malhotra has no plans to sell. ”I have no choice,” he said. ”I have to hold on until they come back.”

Mr. Malhotra likely breathed a huge sigh of relief when tech stocks gained 6.6% on Monday and 7.2% on Tuesday. But this rally, as can only be revealed by history, was to be short lived. Over the next two and a half years, the NASDAQ Composite lost another two-thirds of its value.

I couldn’t read Mr. Malhotra’s comments without wondering what my portfolio would have looked like both while the bubble was inflating and then after it popped. Would I have sold that week? Would I, like Mr. Malhotra held on until they came back? This is why it’s important to have at least a basic understanding of market history. It allows you to ask the question, “What would I have done and what sort of lessons would I have taken away from this experience?”

Looking backwards shows that the market delivers high highs and low lows, which is why buying and holding, though likely to deliver the best long-term returns, can be excruciatingly difficult. It’s easy to be overconfident of our ability to withstand deep losses, given that they haven’t come around in a while. But history shows that most people have a breaking point, and it’s your job as an investor to stay as far away from that line as possible line while also getting close enough to it to reach your financial objectives. Nobody ever said this was easy.

Studying the past doesn’t reveal the future, but maybe it can help to crystallize how you should think about how you invest in the present.

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

The Compound Media, Inc., an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.