The Nifty 50 index has delivered a total return of over 32% in one year and 18.9% over five years. The Nifty Midcap 150 Index has gained over 50% in the past year (5-year CAGR – 37%), while the Nifty Smallcap 100 Index has provided nearly 59% returns in the last year. Valuations of many liquid large-cap stocks are at levels rarely seen in history. Many investors are dismissive of the continuity of such performance in the future, based on their own assumptions.
Experts see many similarities between what happened in the U.S. in 2000 and current market conditions in 2024. Investors can look back at history, considering data and events, to better understand how the markets might behave in the future.
- In 2000, the S&P 500 was seen as “top-heavy,” meaning stock performance was extremely concentrated, with a small number of stocks overshadowing the rest of the market. This mirrors what is happening in 2024.
- In 2000, the internet made a huge impact on everyday lives. Today, AI and ML are having a similar effect. Many companies that emerged during the internet era as major players have not survived until 2024. Will the future once again resemble the past?
- New-age companies that came into existence riding on tech innovation gained significant consumer mindshare. With advertisements splashed across sports, entertainment, and other brands, how these companies performed over the short, medium, and long term offers important lessons for investors.
- High stock market returns led to a surge of new investors. They simply held onto their stocks and reaped profits, reducing the perceived value of financial advisors. The rise of DIY apps and digitalization has also distanced investors from financial advisors. What will be the impact of this trend?
- The Fed raised interest rates several times before the market peaked in 2000. However, it reversed course and began lowering rates by mid-2000, and the stock market started to decline. Monitoring how stock markets behave in relation to Fed rate changes is crucial for investors.
- In 2000, market irregularities and manipulation by some companies led to their downfall. Currently, several stocks have fallen by almost 60% in a short period. Learning from how the stock market coped with such sharp declines is important for today’s investors.
Stock markets in the past were more resilient. Now, they are more volatile and unpredictable. While no one can forecast the future with certainty, it is useful to be aware of risks and to learn from history. This can help investors make informed decisions before putting hard-earned money into the stock market.
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Disclaimer: This blog has been written exclusively for educational purposes.
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Source: ETF
