- The Nasdaq Composite on Wednesday marked the end of its latest bear market.
- Bespoke Investment Group found the tech-focused index tends to log gains over the year following a bear-market exit.
- The latest downturn saw the Nasdaq drop as much as 34%.
The Nasdaq Composite has clawed out of a bear market that saw tech stocks beaten down amid rate hike and recession concerns, and history indicates more gains are in store over the coming months.
The Nasdaq sprang up 2.9% on Wednesday to close at 12,854.80 following some softening in July inflation data. The report bolstered expectations the Federal Reserve in September will opt to raise interest rates by a smaller amount than its previous hikes. Shares of Apple and Amazon were among the large-cap tech stocks that participated in the rally that ended a three-session losing streak.
The Nasdaq "crossed an important milestone" in rising more than 20% from its closing low on June 16th, "which means that from a technical perspective, investors can officially say that the Nasdaq is no longer in a bear market," Bespoke Investment Group said in a note late Wednesday. The Nasdaq closed on June 16 at 10,646.10.
The latest bear market of 108 trading days was the longest since one that ran for 208 trading days in 2008, according to The Wall Street Journal. The Nasdaq sank by as much as 34% during the latest downturn.
Bespoke looked the Nasdaq's performance after its exited a bear market.
"Fortunately for bulls, the median performance following these occurrences tends to be quite positive," with outperformance across each of the time periods it examined.
Among its findings, the index logged a median gain of 4.3% over the following month and a median gain of 13.9% over the following six months. The median gain of the following year was an "impressive" 31.1%.
The Nasdaq also logged 76.5% positive returns over the month following a bear-market exit and had a 70.6% positivity rate over the following year. "Although this positivity rate is lower than that of all periods, nearly all of the negativity came from the dot-com era when we had multiple bull market rallies within a secular bear," Bespoke said.
The Nasdaq as of Wednesday's close was down 19.9% from its all-time high of 16,057.44 notched on November 19, 2021.