Dave, good point about small cap stocks during the Depression, but in any recovery, certainly some sector or another will be the first to recover. The trouble is predicting which one that will be!
In the case of the Depression, it could be argued that most of the speculation had been around "innovative" (meaning, in this case, using creatively dangerous leveraging) financial stocks, so those could have been expected to take the greatest hit, and take the longest time to recover. People had thrown money at these leveraged entities at the expense of small cap stocks, so the small cap stocks experienced less downturn and therefore a faster recovery.
But this time, most of the speculation was in highly leveraged, dangerously "innovative" tech stocks that, like those earlier financial stocks, had no real prospects of success. Again, as in every speculative episode, people were buying these speculative darlings simply because they had been going up spectacularly. In this downturn, it is a fair bet that the tech stocks will be hit hardest (so far that seems to be the case) and will take the longest to recover. While I expect the broad markets to recover swiftly (perhaps in another five years or less), I'm not holding my breath to see the Nasdaq recover within the next twenty years.
Dave |
