If you were in the stock market in the late 1990's and into 2000 and beyond then you probably remember the dot com bubble.
This period became synonymous with overpriced stocks that had little or no earnings to them.
All you had to do was have an internet name and presto you were a company with the ability to attract start up capital.
Many of these companies had no business plan and many never generated any revenues just ideas that never worked out.
The craziness that spawned the run up in prices also took down a lot of good solid companies with earnings that flew too high towards the sun and came crashing down when serious investors realized the party was over and began pulling their money out of the market.
Here we are now in 2010 after several market crashes during the previous decade and what do my eyes behold but Santa and his small cap reindeer.
Yes that's right Christmas in June or July whichever it is is right around the corner.
So what does Stock Market Santa have in his Christmas in June or July stocking's.
(That's right I did kind of give it away with the small cap reindeer thing) Small and mid cap companies have made a nice come back over the last few years, very quietly, it seems.
Several of the indexes that represent smaller cap companies such as the S&P Small Cap Index, The Russell 2000, and the S&P Mid Cap index are substantially higher now than they were in the late 1990's and early 2000-2002.
The NYSE Composite Index is also higher than its 2000 high but not substantially.
The Dow, Nasdaq, and S&P 500 are all below their respective highs from the year 2000.
(You may check out the charts at our website on our updates page for April 10, 2010 to see graphically for yourself the strength in the small cap sectors.
) Click on each chart to see a larger view of the chart.
What does this mean for the markets? HHMM you might ask.
Well it is obvious the markets are saying it all right now.
They are valuing growth opportunities in the stock market more than the old line industrial--financial companies as a whole.
During 2000-2002 the S&P Midcap 400 Index triple topped near 550 before having a relatively mild correction into 2003.
This index began its advance in 2003 which peaked in 2007.
During this time the index was up 108%.
During the market crash starting in 2007 and ending in 2009 it fell hard and has recovered 88% of its value the Dow has recovered 77.
5% of its pre crash value.
The S&P Small Cap index also had a soft correction into 2003 and a strong run into 2007.
The Russell 2000 peaked earlier than its S&P cousins and had a deeper correction into 2003 but did have a strong run up into 2007.
During 2009 the markets ran up strong and have only corrected modestly along the way.
These brief corrections gave more nimble footed traders an opportunity to get back on the train and move along with the rest of the market.
It has not, though, spawned the kind of speculation and investing fervor that gave rise to the dot com bubble.
It seems that the lingering dismal outlook for the economy has given many investors pause as they have been reluctant to resume investing and speculating as they had during the gravy years of the late 1990's and from 2003 to 2007.
As the market moves forward, up, down, or sideways investors will slowly return to the markets as they sense that there is more stability and "likelihood of success" when they enter the markets.
Hopefully, they will realize, in any market environment the key to success is picking good stocks and limiting your losses along the way.
If you limit your losses you will stay in the game longer and have a better chance of having strong gains in good stocks.