1995-2000 The Making of the First Dot-Com Bubble
The economy in the the 1990's was a phenomenon of the information age, with hysteria in markets caused by sudden and unexpected advances in technology and communications. These advances gave rise to the internet and the new opportunities for jobs and business which that went along with it. It was dubbed the Dot-Com boom; Internet businesses such as .com's were growing rapidly even whilst maintaining heavy losses. Many venture capitalists and other types of investor bought into the dream of these models rather than look realistically at figures like profits. A bubble is often the result, when the desire not to miss out becomes larger than an aversion to losing money; the noise around the tech-bubble during this period encouraged many amateur and professional investors alike to sink money into the rising stocks. The dot-com model was unsustainable however because whilst many new opportunities were around, each Internet sector had limited room for competing businesses. Most companies would fail, and only the cream of these companies would rise to the top and stay there. Many people were about to suffer heavy losses in the coming collapse.
Note that the smaller gains in the early part of the 90's decade were largely cancelled by inflation. It was only during 1995 that the bubble began to inflate. The latter part of the boom coincided with lower inflation and lower interest rates which provided easy money to invest further. The S&P rose from 457 on January 03rd, 1995 to 1553 on March 24th, 2000, a nominal return of 239.7% or 199.9% adjusted for inflation. This period gave an inflation-adjusted return of 23.4%, minus dividends.