Rare Nasdaq-100 Run Echoes Past Booms

The Nasdaq-100 index has achieved a rare milestone, marking three consecutive calendar years with gains of 20% or more. The latest surge saw a 54% jump in 2023, followed by 25% in 2024 and an additional 20% in 2025. As of October 2026, the index has already risen approximately 22% this year, continuing its upward trajectory.

Historically, such prolonged rallies have preceded sharp declines. Two prior streaks of similar magnitude both concluded with annual losses exceeding 30%. The first, from 1995 to 1999, saw the index soar before crashing 37%, 33%, and 38% from 2000 to 2002. The second, from 2019 to 2021, experienced a 33% drop in 2022, primarily due to rising interest rates impacting valuations.

However, the current rally shows signs of a more robust foundation. While past periods saw valuations expand significantly with less proportional earnings growth, the current streak is supported by over 80% earnings growth since its 2022 low. This indicates that earnings are driving more of the current gains, unlike the speculative bubble of 1999. Despite this, a valuation correction is still possible if growth slows or interest rates increase.

Investors in the Invesco QQQ Trust (QQQ) should remain cautious. While a 2000-style collapse seems improbable due to stronger earnings, a correction akin to 2022, where valuations contracted despite earnings growth, could occur. The market's performance over the next two years remains uncertain, with the possibility of another 20% gain year or a period of losses.