U.S. Stocks Plunge: Nasdaq's Worst Quarterly Drop in 2 Years, Down Over 22%

Last night, U.S. stocks took a nosedive at the end of the day, marking two consecutive days of decline.

Throughout the quarter, the Nasdaq Composite Index fell by 9%, with the maximum drop during this period exceeding 22%. However, historically speaking, this is actually the most profitable period.

Let's delve into the historical data to find the most suitable investment approach.

01

On the last trading day of the first quarter, all three major U.S. stock indices closed lower, with a rapid plunge in the last half hour of trading. The Nasdaq Composite Index, which represents the trend of technology stocks, fell for two consecutive days, dropping by 1.5% last night.

Since the beginning of the quarter, the Dow Jones Industrial Average and the S&P 500 Index have both accumulated a decline of 4%, while the Nasdaq Composite Index has accumulated a decline of 9.1%, marking the largest quarterly drop in the past two years.

Although the quarter saw a 9.1% decline, the actual maximum drop was much greater. The Nasdaq Composite Index reached its highest point of 16,212 at the end of November last year, falling to its lowest point of 12,555 in mid-March, with the maximum drawdown in this cycle reaching 22.5%.

However, the Nasdaq Composite Index and the other two indices have rebounded recently, so the final quarterly decline has been somewhat mitigated.

02

There are several reasons for the rebound of U.S. stocks since March:Firstly, investors are beginning to downplay the impact of European conflicts, with the emotional shock gradually subsiding;

Secondly, the Federal Reserve has provided a clearer path for interest rate hikes;

Thirdly, after substantial declines, a continuous stream of technical buying has emerged.

In fact, if we take a look back at the historical experiences of the U.S. stock market, we will also find that after such significant declines, it is indeed a good investment opportunity.

At the end of 2018, in early October, the Nasdaq Composite Index was at its highest at 8107 points, and by the end of December, it had dropped to its lowest at 6190 points, a decline of 23.6% in just three months.

However, the Nasdaq Composite Index then began to rebound, and by the end of April 2019, it had already set a new high. This wave, although it fell by more than 20% and the decline lasted for three months, the rebound was also quite swift, taking only four months to set a new high.

When the COVID-19 pandemic broke out in 2020, the index fell from its highest point of 9838 points to 6631 points by the end of March, with a much larger drop, exceeding 30%.

However, by mid-June 2020, the index began to set new highs once again.

This decline was due to the outbreak of the pandemic, and the speed of the decline was particularly fast, with a drop of more than 30% in just one month, but the rebound speed remained quick, and by mid-June, it began to set new highs in just two and a half months.

The decline of the Nasdaq Composite Index during this period actually started from its highest point on November 22nd, at 16212 points, and when it fell to its lowest point in March, the drop reached 22.5%. Since then, it has rebounded by 13.3% from its low point.Let's take a look back at these historical data points, and we find that the Nasdaq's decline exceeding 20%, or even 30%, is not an absolute rarity. It happens roughly every one or two years, or every two or three years. However, each time such a drop occurs, whether it lasts for a month or three to five months, it can always rebound quickly within a shorter period afterward, filling in the gap.

Therefore, if we are engaging in fixed investment in funds, this period has actually been a pretty good opportunity.

I've calculated the data, using a fund pegged to the Nasdaq index for fixed investment. If we started from the last day of last year, investing 1,000 yuan per week, up to now, a total of 12 weeks have been invested, with a total investment of 12,000 yuan, and we have already achieved a 4% return.

If the Nasdaq continues to rebound for a while, the current 4% return will become higher.

In the coming period, the U.S. stock market will still experience significant fluctuations. For example, the market has already begun to worry about the continuous rise in inflation and has entered another interest rate hike cycle. The future economic growth rate will start to slow down gradually. It seems that future fluctuations will be even greater, but it is also more suitable for fixed investment.

If we are not considering a fixed investment for just three to five months, but rather for three to five years, I still believe that this method of fixed investment is viable.