The Stock Market Is Doing Something for the 7th Time Since 1990 — It Hints at a Very Big Move in the Next Year

Key Points

• The Nasdaq Composite crashed earlier this year but the technology-heavy index quickly rebounded to enter its seventh bull market since 1990.

• The Nasdaq has advanced 47% since the current bull market started, but the index has returned an average of 281% during past bull markets.

• The Nasdaq-100 currently trades at 35 times earnings, a material premium to the 10-year average of 26 times earnings.

• 10 stocks we like better than NASDAQ Composite Index ›

The Nasdaq Composite (NASDAQINDEX: ^IXIC) is one of three major U.S. stock market indexes alongside the S&P 500 (SNPINDEX: ^GSPC) and the Dow Jones Industrial Average (DJINDICES: ^DJI). Whereas the S&P 500 is considered a gauge for the entire domestic equities market and the Dow Jones a collection of blue chip companies, the Nasdaq is seen as a benchmark for growth stocks, especially those in the technology sector.

The Nasdaq fell into a bear market earlier this year when President Trump stunned Wall Street with sweeping tariffs. The index closed 24% below its record high on April 8. But that low point marked the onset of a new bull market — the seventh Nasdaq bull market since 1990 — and history says the index is headed much higher in the next few years.

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Here’s what investors should know.

Image source: Getty Images.

History says the Nasdaq Composite could surge 31% in the next year

The definition of bull market varies depending on the source, but it most commonly refers to a situation in which a stock market index has (1) advanced 20% from the previous bear market low and (2) attained a new record high.

By that definition, the Nasdaq Composite — which tracks about 3,300 stocks listed on the Nasdaq Exchange — recently entered its seventh bull market since 1990. Past performance is never a guarantee of future results, but we can analyze previous bull markets to make an educated guess about the future. The chart below provides details.

Bull Market Starts	Return	Duration (Days)
October 16, 1990	519%	2,834
October 8, 1998	256%	516
October 9, 2002	628%	5,805
December 24, 2018	52%	422
March 23, 2020	134%	606
December 28, 2022	98%	719
Average	281%	1,817

Chart created by Author. Data source: YCharts.

As shown above, the Nasdaq returned an average of 281% during the last six bull markets, and it achieved those returns over an average of 1,817 days (about five years). That means the index has compounded at 31% annually during bull markets since 1990.

That data tells us two things. First, the Nasdaq will advance 31% in the next year if its performance matches the historical average. Second, because the index has advanced 47% since the current bull market started on April 8, history says will still climb another 234% before the bull market ends.

However, the Nasdaq-100 — an index that tracks the 100 largest non-financial stocks in the Nasdaq Composite — currently trades at 35 times earnings, a material premium to the 10-year average of 26 times earnings. Given that valuations are quite elevated, forward returns may be much worse than historical data suggests.

The Invesco QQQ ETF provides heavy exposure to technology stocks

The Invesco QQQ ETF (NASDAQ: QQQ) tracks the Nasdaq-100. Like its benchmark, the index fund is most heavily invested in technology stocks (64%) and consumer discretionary stocks (18%). The 10 largest positions in the Invesco QQQ ETF are listed by weight below:

1. Nvidia: 9.7%
2. Apple: 8.3%
3. Microsoft: 8.2%
4. Alphabet: 6.3%
5. Broadcom: 5.8%
6. Amazon: 5%
7. Tesla: 3.4%
8. Meta Platforms: 3.3%
9. Netflix: 2.3%
10. Palantir Technologies: 2.2%

The Invesco QQQ ETF has returned 1,330% since its inception in 1999, which is the same as 10.5% annually. That period covers a broad range of economic and market conditions, including five bear markets and three recessions, so investors can expect similar returns over long periods in the future. That is especially true because artificial intelligence should be a major tailwind for the technology-heavy Nasdaq-100.

The last thing investors should consider is the fee structure. The Invesco QQQ ETF has an expense ratio of 0.2%, which means shareholders will pay $20 annually on every $10,000 invested in the index fund.

All things considered, the Invesco QQQ ETF is a good option for risk-tolerant investors that want exposure to growth stocks, and now is a reasonable time to buy a few shares given that the Nasdaq bull market is very young by historical standards.

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Trevor Jennewine has positions in Nvidia, Palantir Technologies, and Tesla. The Motley Fool has positions in and recommends Alphabet, Apple, Meta Platforms, Microsoft, Netflix, Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.