2000 Similarities

I often think about past periods in stock market history which seem to resemble the current trading period.  It serves as a rough guide to see what we can expect in the current environment.  It is something to do more out of curiosity than anything else.  It doesn't replace a thorough overview of the current fundamental, technical, and statistical factors which determine my view and trading strategy. 

Right now, after a 9 year bull market, you have to look at past periods after extended uptrends.  That narrows the comparisons right away.  Next, you have to look at how the stock, bond, commodities and FX markets compare.  After making these comparisons, this period looks more like 2000 than any other that I can find in US stock market history. 

Here are the similarities to 2000: 

1.  The stock market had rallied strongly the past several years, punctuated by a more extreme and steep rally at the beginning of the year.  Sentiment was positive and investors were more fully invested than anytime in the past 10 years. 

2.  The Fed was in a rate hiking cycle as the 10 year yields hit multi-year highs.  Inflation had picked up from the previous year. 

3.  Oil bottomed after a deep bear market 2 years earlier (in 1998 for 2000, in 2016 for 2018). 

4.  The dollar was in a correction after rallying strongly the previous several years. 

5.  The Nasdaq was outperforming the S&P 500 very strongly for the past year, and a bubble was forming in select tech names. 

It is a bit eerie how similar the current market price action, with the increased volatility at the top, are to that of 2000.