Where Are All the "Dip-Buyers?"

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Funny thing. The S&P and Nasdaq have had a hard fall, but something is missing! Where are all the traders screaming, “buy the dip!”

Remember when they used to say things like there is $2 trillion waiting to go into stocks…buy the dip. I am not going to list all the crashes and pullbacks, but “buy the dip” are the three greatest words in the history of  the stock market. 

Every crash has eventually turned into new highs, but sometimes it takes longer than people would like. The one that sticks out to me is the 2008 credit crisis. If you bought the dip in the SPX cash at its March 2009 low at 666.75 and held it to the July 2024 all-time contract high at 5669.67, it turned into one of the largest bull runs in history with a gain of more than 5,000 points or 750%.

It's not always easy to buy when everyone is selling. According to Goldman Sachs, after a 5% drop from a recent high, the S&P 500 has generated a median return of 6% over the following three months.

2000 Tech Bubble

Now a look at tech. 

After the 2000 tech bubble popped, the Nasdaq Composite made its low at 1,108 in October 2022 (and then almost double-dipped in 2008-09, with a low at 1,265 in March 2009). Nevertheless, the Nasdaq made its all-time high at 18,671 in July 2024, a gain of 17,562 points or 1,584%. 

But the 2000 tech-bubble was different…

I remember one of the guys at my desk bought the QQQs just before the tech crash and it took 15 years to get back to the dot-com highs. Today the tech sector is different. The number of companies in the index has fallen from 4,824 companies in March 2000 to 2,569 today. Unlike 2000 when 65% of the Nasdaq's market cap were technology stocks, today it's down to 43%. Further, there are multiple sectors, including consumer discretionary, healthcare, and industrials, among others. 

We all know how much the S&P and Nasdaq have rallied. What we don't know is what a real crash looks like and I don't think we have seen one yet.