Game of Trades: SP500 Looking Very Familiar to the 2001 Bear Market

Whether the economy is going up or down, it can be helpful to place the current move in a historical narrative where similar trends have played out.

Rising inflation rates hark back to a period last seen over 40 years ago. However, the charts are showing that the market is more likely simply deflating. That means some of the market’s excessive returns over the past two years are unwinding.

A more accurate comparison would come from the 2001 bear market. While tech stocks peaked in 2000, 2001 saw further declines. And the final rally higher in the late 1990s was similar to the market performance of the past two years.

This time around, history somewhat repeated itself. Tech once again led the market far higher, and is now underperforming on the way down.

As of last week, markets have had 7 down weeks in a row. The last time this happened was also in 2001.

If the similarity to 2001 continues, traders should expect markets to continue sliding. And stocks will eventually bottom out, but will take a long time to recover.

So those hoping for a repeat of a V-shape recovery in stocks like in 2020 may be disappointed. That’s true given the signs of an economic slowdown, and the Federal Reserve continuing to tighten monetary policy right now.

To view the full video comparing today’s markets to the 2001 decline, click here.