U.S. Late Cycle Means Time to Look Abroad

Jon Economy

Given the events of the last few weeks (North Korea, Charlottesville, etc.) as well as seasonality, the U. S. equity markets have moved into a correction phase. Over the last few months, the market has experienced several shallow 2%+ corrections and has snapped back within a few days with a new high. This action is very reminiscent of the bull market from 1994 to March of 2000, with the exception of the 1998 Russian Ruble, Asian, and LTCM liquidity crises, which, collectively, produced a sharp 20% drop in one month. The U. S. Fed dropped rates quickly and the market recovered. From that correction low to the end of the bull market in March of 2000, the Dow doubled and the U. S. GDP peaked at 7%. The Fed continued to push rates up and eventually pricked the dot-com bubble.
I believe the S&P 500 is most vulnerable to a drawdown as it is supported mainly by six tech stocks: Facebook, Apple, Amazon, Microsoft, Netflix, and Google.
Although I do not believe the bull market is over, a few items have come to light from my research that are concerning:

This post was published at FinancialSense on 08/25/2017.