Jeremy Phillips
9 min read
Quick Read
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QQQ closed at $681.09 on Nov. 2, 10.3% below its Oct. 6 record of $759.66, hit $647.05 on Nov. 5, recovered to $690.38 Wednesday and slipped about 1% after hours to $684, 10% under the record again.
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After the 27 earlier first-10% closes, the fund was higher three months later 21 times of 27, six months later 22 of 26, and a year later 19 of 25 with a median gain of 18%; the six losses were all in 2000, 2008 and 2022.
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For a 68-year-old with $300,000 in the fund and $200,000 in Treasury bills, the bills cover 67 months of a $36,000 draw, longer than the 38-month 2008 recovery and the 23-month 2022 recovery; the 2000 case took 16 years and was carried by the rest of the portfolio.
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Tech stocks just sent a signal they have sent 27 times since 1999: the Nasdaq-100 closed 10% below a one-year high, the 28th time since the fund that tracks it, Invesco QQQ, began trading, and the other 27 times tell a retiree holding it most of what history has to say. The fund closed at $681.09 on Nov. 2, 10.3% under its Oct. 6 record of $759.66, fell to $647.05 by Nov. 5 in the chip selloff, climbed back to $690.38 on Wednesday, and then slipped about 1% after hours to $684, which puts it 10% under the record again.
The after-hours slide followed reports that Nvidia’s board is preparing to replace its chief executive, which sent Nvidia, one of the fund’s three largest holdings, down about 9% after the close. That is the one line this story spends on Nvidia. The pattern is bigger than one company.
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A 10% drop from a high reads as a warning that the fund’s biggest holdings were priced for more than they are delivering; on the record below, it has also been a buying point far more often than the start of a crash. Both readings are true at once, and if you hold the fund, the three times the drop kept going are the reason you need a plan for the second one before you know which kind this is.
