This is Not 2015-2016

I see some past data-centric players note the bearish sentiment, put/call ratios, drop in oil prices, renewed Chinese fiscal stimulus, and immediately assume that the current market is similar to late 2015/early 2016. 

But they forget the big difference:  the bond market.  This time 3 years ago, Yellen finally raised rates for the first time in seemingly forever and oil prices were plunging, with high yield credit spreads blowing out, but Fed funds were only at 0.25-0.50%, not 2.25-2.50%.  2% is a huge difference for such an overleveraged global economy.  And US rates affects a huge portion of the global economy via LIBOR. 

Another big difference is the current valuations.  Price to book and price to revenues are still higher than every period except the dotcom bubble era.  Price to earnings ratios are not so high, due to the tax cuts and the high profit margins, but corporate tax rates will be an easy target for the next Democratic president.  Investors assume that the corporate tax cuts are something that will last forever.  With the size of the budget deficits, and the projected increases in the future due to entitlements and an aging demographic, there will be pressure to find tax revenues, and with growing populism, corporations will be an easy target, even with the huge lobby base that they have installed in Washington. 

This time around, China is in an even worse financial position, having pumped out even more debt to keep the economy going the last 3 years, and they don't seem as keen to repeat the process this time around. 

From a cyclical perspective, this is even later cycle as we never got the recessionary flush and renewal in the past 10 years.  And the Fed chairman is Powell, not Yellen, so money will be tighter. 

I am seeing more of a 2000-2002 bear market scenario here, and will trade accordingly in 2019.  By the summer of 2019, it will become clear to everybody why the markets have been going down.  Of course, prices will be much lower at that point.  Now many are still confused as to why the market is dropping so hard even with strong wage growth and decent GDP numbers.  So there is still a lot of opportunity on the short side on bounces.