Time flies when you’re coming undone. Next week will mark the anniversary of the all-time peak in the Nasdaq , the moment of maximum belief in the predictability and power of dominant digital business models. From Nov. 19, 2021, until the bear-market low to date, hit less than a month ago, the Nasdaq Composite lost 37% of its value, returning to a level first reached 28 months earlier. The Nasdaq record came just ten days after Bitcoin’s apex near $67,000, a moment when total cryptocurrency market value topped $2.8 trillion. Those numbers today are under $17,000 for Bitcoin and the crypto market cap is around $800 billion, down 70%-plus. Just days after the November 2021 Nasdaq high, Federal Reserve Chair Jerome Powell abruptly and publicly shifted his rhetoric on inflation and monetary policy, endorsing a much faster removal of stimulus than previously indicated. The result has been a near-30% loss in long-term U.S. bonds and the most rapid tightening of financial conditions in decades. Taken together and viewed with hindsight, November 2021 was more a culmination moment for animal spirits in a high-liquidity, fast-recovering economy, even if at the time it might have seemed the most crucial development was the emergence of the Omicron Covid variant as a threat to economic reopening. Now is a natural point to ask, what has been accomplished in the past year with the drastic setback in asset values and the turn from pervasive greed to persistent worry? And how much might be left to go? Among worst losses in history In terms of the magnitude of setback, the Nasdaq has now logged one of the four worst 12-month declines in its history (dating back more than 50 years), as shown in this chart from Bank of America. Note that when those sharp bottoms are made, it doesn’t mean the Nasdaq itself has begun racing higher, just that the 12-month trailing return is getting less negative. The financial crisis drawdown on the chart into late 2008 seems less relevant than the deeper 2000-2002 assault, in terms of key drivers and the economic backdrop. This is not a systemic meltdown from broad insolvency risk among over-levered banks and consumers, as in the 2007-2009 financial crisis. It was, in both 2000 and 2021, a high-pressure economy stoking popular over-excitement about technological innovation, leading to valuation excesses and a momentum peak, which began to unspool as mispriced risk and misallocated capital began to become evident and the Fed began tightening. Looking at the Nasdaq drawdown chart above is, on the surface, not all that reassuring, given that the Nasdaq in 2001 twice logged around a 60% 12-month drop. But the ramp to the highs then was far steeper and the valuation appreciably more extreme. In the 18 months leading to the March 2000 Nasdaq peak, the index more than tripled. In the 18 months ending with last Nov. 19’s high, it had gained 75%. One year after the March 2000 Nasdaq peak, with the index down some 60%, the Nasdaq 100 still had a forward price/earnings ratio above 50. In the current cycle, the Nasdaq 100 peaked just above 30-times expected earnings and is now at about 20. Today vs 2000 In part this reflects the fact that today’s Nasdaq is quite different in makeup and financial character than was the more immature, excitable and volatile year-2000 version. The biggest and most profitable companies now are Nasdaq heavyweights. The Tech Bubble Nasdaq was a bit more like the racier emerging-growth baskets such as ARK Innovation , which — along with special purpose acquisition companies and the broader upstart software and ecommerce sectors – have already had the kind of 70% collapses that ultimately hit the early-2000s Nasdaq. One through-line from two decades ago to today is Microsoft . It was admittedly a younger and faster-growing business then but with a similarly dominant competitive position as now, and comparably impressive financial performance. This long-term view of Microsoft’s P/E shows the protracted valuation compression in absolute terms and relative to the broad market, which took it four years to sink to the level where it sits now, at a still generous 24. The stock would go sideways for the better part of a decade, lagging the steady rise in the company’s profits as investor interest moved elsewhere. The humbling of several growth-stock favorites underway now brings up some of the same issues that Microsoft and other giants of the PC and early-Internet era faced. Microsoft founder Bill Gates handed off the company to a CEO successor at almost the exact climax of Y2K tech fever, somewhat the way Jeff Bezos departed Amazon in July 2021 at the stock’s high point, from which it would go on to be cut in half over 16 months. It’s been widely suggested, too, that Meta Platforms could find itself approximating the path of Yahoo or AOL, enormously successful and stupendously valued consumer Internet leaders that hit a growth snag and struggled to find a next act. Though financially and in terms of investor demands, Meta, along with Alphabet, are candidates to follow Microsoft’s lifecycle, too. The Street now wants these companies to behave less like broadly ambitious aggressive-growth companies and to harvest cash flows from steady core oligopolistic businesses, get leaner to preserve profit margins, invest more discerningly and perhaps even initiate dividends and distribute a greater share of earnings through share buybacks. The Nasdaq today is littered with many dozens of busted, less-established growth companies, those packing the Goldman Sachs Non-Profitable Technology Index and the various cloud-software, fintech and ecommerce ETFs. The mop-up process for this tier of the market is likely to be prolonged, uncertain and animated more by survival instincts than bold strategies — and ending in opportunistic takeovers far below peak valuations for the lucky ones. Many fallen hypergrowth names are now laboring under the weight of excessive stock-based compensation that will make it hard to outrun ongoing dilution, another echo of two decades ago. In 2001 and 2002 I remember screens of neglected tech stocks with market values below the net cash on the companies’ balance sheets would surface dozens of names. These exercises are underway now, as well. Where’s the bottom? From an investor’s perspective, it makes sense to keep in mind that even if the Nasdaq and broader growth complex is near or even just past a good tradeable bottom, the overheated leaders of a prior bull market are rarely the group that leads the next one. In the bear market from 2000-2003 and the rather tame bull market that followed, boring blue chips (healthcare, industrials, financials), value stocks, inflation beneficiaries and small caps were consistent outperformers. The equal-weighted S & P outran the market-cap-weighted benchmark, as it’s been doing in 2022. Here’s the performance of the small-cap Russell 2000 relative to Nasdaq Composite since the dot-com bust. That breakneck surge in 2001 is mostly about big-cap tech collapsing in absolute terms, but smaller shares did create value in their own right in those years. The fall of crypto platform FTX from acclaimed innovative juggernaut to bankruptcy even echoes with the early-2000s comeuppance of Enron and WorldCom, though those did cause a huge crisis of confidence in equities and accounting practices. If the widespread claim that “The Fed will tighten until something breaks” is now true only because crypto has broken and a few leading intermediaries have collapsed, without infecting the economy of financial assets, that’s quite a win. None of this speaks directly to whether last week’s ferocious rally, which jolted the S & P 500 up 5.5% on Thursday and almost 6% for the week, is a meaningful sign that a durable bottom is in. Yes, inflation declining from high levels is historically a bullish tailwind for stocks, the S & P had done well to withstand noisy tech earnings blowups and carry through the election without buckling toward the October lows. The dollar looks like it might have topped, the Fed’s ultimate destination on rates is perhaps becoming a hazy outline on the horizon, the calendar is free of worrisome known catalysts, seasonal factors are benign, credit conditions are holding up and the economy quickening a bit this quarter. It all hints at hopeful possibilities though proves nothing yet. Another 2% S & P 500 rally would take it up to challenge the 10-month downtrend line, which thwarted the summertime rally. Many such fleeting rebounds interrupted that other Nasdaq-led bear market two decades past, until one rally that looked quite a bit like the failed ones managed to hold up.