1980s and 1990s: Nikkei and NASDAQ
Japan benefited from tremendous growth in the 1980s, thanks to exports from companies like Honda (HMC) and Toyota (TM). That growth meant a booming stock market, which became the source of a speculative frenzy. From 1984 to 1989, the Nikkei surged from 9,900 to 38,915. A big catalyst was an easy monetary policy, which also inflated the value of real estate. The Imperial Palace alone was worth more than all the real estate in California.
But when the Nikkei collapsed, so did the Japanese economy, creating a slow-growth economy that lasted for more than two decades.
Not long after, the U.S. had a similar speculative stock bubble in the 1990s. This time, the driver was the Internet revolution. Just about any company that had a dot-com at the end of its name could fetch multi-billion dollar valuations.
It was the kind of fuel that made NASDAQ go parabolic, spiking from 1,600 in 1998 to a peak of 5,048.62 on March 10. But as with most bubbles, the fall was quick and brutal. Within about a year, the index lost more than half its value.