We recently did a B.I.G. Tips report looking at the declines in the S&P 1500 Homebuilder index from its peak in July 2005 and comparing them to the popping of the Internet Bubble. One chart from the report that we have made available below is a simple comparison of the returns between the Homebuilder index and the Nasdaq since the Homebuilder index began back at the start of 1995. The simple chart highlights some very interesting points:
- With so many comparisons lately between the current period and the '98 Russian debt/LTCM crisis, the chart shows how the two indices began diverging right as the '98 crisis was unfolding. The tech heavy Nasdaq exploded while the Homebuilders and most other sectors continued to struggle. This backs the bullish case for those that are currently looking for large cap tech to outperform.
- The Homebuilders bottomed just four days after the Internet Bubble popped (3/14/00 vs 3/10/00). Investors basically moved from one bubble to the next.
- Surprisingly, the Homebuilders went up more during their bubble than the Nasdaq did during its bubble. When the Homebuilders peaked on July 20th, 2005, they were up 964% since March of 2000.
- Finally, while both rose sharply only to eventually give up quite a bit of their gains, a long-term investment in either of the two indices at the start of 1995 would still have produced gains of at least 230% today.