Isn’t it amazing how quickly sentiment can change on Wall Street. Only a year ago the SPX500 hit what was then an all time record. In the wake of the coronavirus disease 2019 pandemic, the index then dropped 35% in under a month. Note that previous bear market losses in the SPX500 of +30% took an average of 11 months to happen.
The NSDQ100 leans heavily on high-growth technology and biotech stocks, that have widely outperformed the SPX500 since the bear market bottom on March 24th last year. Feb 12th 2021 closing high of 14100 points represented a peak gain of over 105% in less than 11 months.
In just three weeks, the Nasdaq has shed over 8% of its value, and was down a peak of 12% during its intraday low on March 5th. Rising Treasury bond yields have investors panicked, even though it's perfectly normal to see yields rise during the early stages of an economic recovery. Investors sell bonds and buy stocks, and traders are worried that rapidly rising yields could cause an exodus in the other direction. In other words, Treasury bonds are viewed as highly safe, income producing assets. If yields were to handily outpace the inflation rate, some investors might choose bonds over Wall Street. The coronavirus pandemic also remains at large, even with three vaccines, the worry is that not enough people will choose to be vaccinated, prolonging the pandemic.
But is there a second chance for investors?
A NSDQ100 bear market would also allow investors who missed the initial rocket launch of videoconferencing platform Zoom Video Communications (ZM) a second chance to jump on the train. Last week, Zoom reported full-year sales of $2.7 billion up over 320% year on year, which is up from $910 million in expected sales.
The thing is, Zoom should remain in play well after the pandemic has passed. As of April 2020, Zoom had a market share of 43% of all web conferencing technology in the USA, which was more than double Microsoft Teams. Though some workers will soon be heading back into the office, the practice of working from home isn't going away anytime soon. Zoom is the type of business that could triple its sales in 5 years so it’s certainly a stock I will be adding to my portfolio again.
Tomorrow I will be highligniting another little gem buried in the NSDQ100 bear market.