Market exuberance led to major corrections in late 1990s, 2007, and 2021

From Investing.com: 2024-11-24 03:30:00

Market exuberance often precedes significant corrections, as seen in three major episodes identified by Deutsche Bank Research. The late 1990s dot-com bubble, pre-global financial crisis of 2007, and speculative surge in 2021 all ended in substantial downturns due to elevated valuations and irrational optimism.

During the late 1990s, the S&P 500 saw a meteoric rise, driven by a tech stock rally fueled by internet optimism. This bubble eventually burst, leading to three consecutive years of losses and high market valuations not seen again for decades.

The global financial crisis in 2007 stemmed from a period of calm and stability that bred complacency. The collapse, triggered by cracks in the subprime mortgage market, wiped out trillions in wealth and reshaped the financial landscape globally.

The Covid-19 pandemic prompted a sharp economic contraction in 2020, but unprecedented stimulus fueled a market rebound with soaring asset valuations by late 2021. However, a shift to aggressive rate hikes in 2022 led to a widespread selloff, with the S&P 500 declining over 25% and Treasury yields seeing historic rises.



Read more at Investing.com: 3 times sky-high market valuations ended in big corrections By Investing.com