Technology & Finance Bubble Aftermaths

Another pair of charts courtesy of the terrific Ron Griess of The Chart Store.The first looks at the 2000 bubble in Technology, and how stocks behaved after that crash. The second is a look at a similar boom and bust — the financial sector bubble and collapse.

The technology boom was actually bigger than finance in terms of the SPX — it hit 33% of the S&P500 from 5% over 6 years. However, the finance boom lasted much longer, covering 15 years and rallying from 6% to 22% of the S&P500. I have not crunched the numbers, but I suspect that as a percentage of GDP economic activity, the finance boom was considerably larger.

Given that we know market history does not repeat precisely, but so often rhymes, the question confronting investors today is this: Will the future of the finance sector be similar to that of tech?

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Information Technology as a Percentage of S&P500

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Financials as a Percentage of S&P500

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This places the current reaction of the finance sector somewhere in mid 2003, following the first major bounce.


Originally published at The Big Picture and reproduced here with the author’s permission.

One Response to "Technology & Finance Bubble Aftermaths"

  1. Guest   June 9, 2009 at 4:27 pm

    I would submit that the major difference between the two is earnings. A lot of banks that were actually making money were dragged to the bottom of the ocean with the dead ones.Not really so with tech. Yes, there were a few earners, but the majority of those companies, at the time, were not making a dime.