Yield Spread vs Nasdaq-SP500 Ratio

Looks like the late 1990s to me. Note the brief dip into an inverted yield curve (30-year below Fed Funds) in August 1998 and August 2019.

I've discussed the parallels with 1998 before, as well as the potential for coronavirus to be the "Y2K bug"money printing excuse of this cycle. The latter post has links to many prior posts discussing cycles.

The timing hasn't exactly lined up. Depending on what measure is used, the top is late or we're still early. Take the rate spread above. That lines up pretty well assuming that we agree the Nasdaq in 2000 was more speculative or more divergent from the S&P 500 than today, the latter being proven by the weight of top Nasdaq stocks in the S&P 500. Let's say that works. We have an August 1998 bond market signal that repeats with an August 2019 signal. The Fed pumps liquidity in 1999 with Y2K bug looming and in 2020 with coronavirus and lockdowns spreading. In 2000, the dotcom bubble peaks in March. In 2021, sepculative stocks represented by the ARKK fund peak in February. In 2020, the major indexes finanlly give way in September 2000. Stock markets sink into a multi-year bear market. The parallel starts breaking down here because the major indexes didn't make new highs after March 2000 and went sideways instead. Except for the Russell 2000 Index, which peaked in March, the S&P 500, DJIA and Nasdaq have all made new all-time highs since then.

History doesn't repeat, but it does rhyme. There's enough smoke to wonder if a fire is burning somewhere. Taking this in concert with other data, one such example here, A TIC Trio of More Serious Deflation Potential: Asset Rebound, Banks Can’t Borrow T-bills From Foreigners, And The China Cringe Which Goes Along

I see potential for either a correction or perhaps the end of the bull market. If that is an upward sloping H&S forming on ARKK, the target is below the horizontal—though the horizontal might hold—a decline of 75 percent or more over the next couple of years. Having said that, until there are key breaks in major indexes such the Russell 2000 Index and MSCI Emerging Markets Index, two of the indexes closest to signal a possible bull market top, one must assume higher prices are likely for the major indexes. Bears must keep to individual stocks until the majors crack.