Nasdaq Off to its Best Start in 21 Years

The Nasdaq Composite Index if off to its fastest start since 1991.

Thanks in large part to Apple’s (Nasdaq: AAPL) epic run, the tech stock-heavy exchange has gained 18.4% so far in 2012 – the fourth-fastest start to a year since the index was founded in 1971. Through 54 trading days, only 1975 (27.4%), 1987 (24.8%) and 1991 (24.7%) have eclipsed this year’s fast Nasdaq start.

What should we expect the rest of the year from the world’s second-largest index? Historical results are mixed.

The last time the Nasdaq got off to this fast a start, in 1991, the momentum carried through the remainder of the year. After gaining 24.7% in the first 54 trading days, the index gained another 25.75% over the final 10-plus months.

However, the two times the Nasdaq started faster than this year and 1991, the index either leveled off the rest of the year or fell off a cliff.

In 1975, the Nasdaq only managed 1.9% more gains the rest of the year after racing to 27.4% gains over the first two-and-a-half months. In 1987, the 24.8% gains Nasdaq stocks made over the first 54 trading days were all but erased by year’s end, as the index fell 24.1% from late March through December.

The most recent fast start for the Nasdaq had an even worse ending. In 2000, the index soared 17.9% over the first 54 trading days only to get crushed the rest of the year after the dot-com bubble burst. From mid-March on, Nasdaq stocks fell 48.5% that year.

Of the 10 fastest starts for the Nasdaq through 54 trading days, only twice did the index gain even half as much the rest of the year.

So while Nasdaq stocks are on fire (thank you, Apple), history tells us that these types of runs can be difficult to sustain for an entire year.

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