In 1999 it gave employment to vast numbers of IT specialists who were tasked with ensuring that, when the year 2000 was upon us, cash machines continued to dish out money, planes did not fall out of the sky and our computers continued to work properly. The concern was when the date moved from 99 to 00, computers would be unable to cope. In the end all went smoothly, but there were quite a number of well-off technology consultants as a result.
So concerned was the US Federal Reserve Bank over likely consequences that Chairman Alan Greenspan pumped liquidity into the US banking system. It happened that technology shares, along with those in media companies and mobile telecommunications, had become a must-have investment, with new ventures being launched on an almost daily basis. The extra cash in the economy appeared to fuel demand for these businesses, with valuation levels being driven sky high.
It was almost exactly 18 years ago that this aptly named TMT bubble burst. In March 2000 profit taking in the highly inflated technology, media and telecommunications companies listed on the stock market turned into a rout. The previous two years had seen many of these companies rise in price many times, with some very fancy valuations accruing to the shares. The end of this crazy bull run came, perhaps unsurprisingly, as Mr Greenspan turned off the money tap at the end of the first quarter.
The recent sell-off in technology stocks in the US put me in mind of those remarkable days as the new millennium got underway. The situation today is very different to then, though. Technology companies have truly come of age during the past decade or so. Back at the end of the 20th century it was the promise of what might be achieved that got investors all fired up. Today many of the largest companies by stock market valuation are those in the technology sector.
But businesses like Apple, Google and Amazon are now vast and highly profitable. While some parts of the technology industry have received a bad press in recent months, the fact is that the promise that was talked about two decades or so ago has been turned into reality. Anyway, it wasn’t concern over extravagant valuations that caused investors to dump the shares. Rather, it was fears of the growing trade war between China and the US that unsettled markets.
London took the events on Wall Street pretty much in its stride. Early losses were clawed back in some measure, much as they had been in the Far East. In the States it seemed to calm down fairly swiftly, too. Still, this year has got off to a difficult start. We are still in what is best described as a correction phase, but investors are clearly jumpy, so further upsets should not be ruled out. Whether it turns into a full blown bear market, only time will tell.