Is 2024 Eerily Similar To The 2000 Dot-Com Bust?

Summary

In this financial analysis video, the host compares the 2024 market conditions to the 2000 dot-com bubble, highlighting a bond market signal similar to that of September 2000. They delve into the July employment report, VIX volatility, and various stock indices' performance. The video emphasizes the importance of an open-minded approach to the market, using historical data to assess probabilities and trends, rather than predicting outcomes. It concludes by reminding viewers that the current market shows resilience and differs significantly from the volatility of 2000.

Takeaways

• 📉 The bond market triggered a signal similar to September 2000, indicating potential market concerns.
• 📈 Despite a disappointing monthly labor report, the stock market showed widespread weakness but also signs of potential recovery.
• 👷‍♂️ The BLS household employment survey revealed 1.54 million workers affected by weather, a figure significantly above the historical average.
• 📊 A rare shift in demand for treasury bonds occurred, historically leading to an average gain in the S&P 500 of 15.8% within 12 months.
• 📊 Tech stocks have historically shown a median return of 26.5% one year after similar bond market signals, with 89% of cases seeing the market higher.
• 📉 The S&P 500's performance post-2000 bond market signal was poor, with significant drops 6 and 12 months later.
• 📊 The stock-bond ratio chart comparison between 2000 and 2024 shows a different market scenario, with 2024 appearing less vulnerable.
• 📈 CCM model scores indicate significantly better market conditions in 2024 compared to the year 2000, suggesting a stronger trend.
• 📈 The VIX spiked over 40% in a session, which while concerning, has historically not been a definitive bearish signal.
• 📊 The Goldman US Panic index showed a spike to high levels, indicating a potential overshoot in market pessimism which can precede rallies.
• 📉 The S&P 500's anchored volume-weighted average price chart shows no signs of an alarming trend, suggesting the current pullback could be part of a normal market correction.

Q & A

What is the main concern raised by the bond market signal triggered in August 2024?

The bond market signal in August 2024 is concerning because it was similar to the one triggered in September 2000, which preceded the dot-com bubble burst and a significant market downturn.

What does the BLS household employment survey indicate about the July employment report?

The BLS household employment survey indicates that 1.54 million workers were not working or only working part-time due to weather, a figure far above the historical average, suggesting potential underlying issues in the labor market.

How did the labor report affect the stock market on the day it was released?

The disappointing monthly labor report led to widespread weakness in the stock market on the day of its release.

What was the historical context provided for the demand shift in US Treasury Bonds?

The demand shift in US Treasury Bonds has only occurred nine times since 1967, with the 10th instance being July 31st, 2024. Historically, such shifts have been followed by an average gain in the S&P 500 12 months later.

What was the performance of technology stocks one year after the bond market signal in September 2000?

One year after the bond market signal in September 2000, the median return in the information technology sector was 26.5%, with tech stocks being higher in 89% of these historical cases.

What was the VIX's performance during the session on Friday, August 2nd, 2024?

During the session on Friday, August 2nd, 2024, the VIX was up over 40%, indicating increased market volatility.

How does the current stock-bond ratio compare to the situation in September 2000?

The current stock-bond ratio is significantly different from the situation in September 2000. In 2024, the ratio made a new high just three weeks prior, whereas in 2000, the ratio was vulnerable and had last made a new high eight months prior.

What is the significance of the anchored volume-weighted average price (VWAP) chart?

The anchored VWAP chart helps assess the strength of a trend by comparing the price levels to previous highs and lows, indicating whether the current market is in a strong uptrend or if there are signs of vulnerability.

What does the comparison between the CCM model scores on September 18th, 2000, and the present day indicate?

The comparison indicates that the current market conditions are significantly better than those on September 18th, 2000, with stronger trend strength scores and a lower market vulnerability.

What is the potential implication of the VIX spike during the session on Friday, August 2nd, 2024?

While a VIX spike can be concerning, historical data shows that such spikes have occurred during periods that later resolved to the upside, suggesting that the current spike may not necessarily indicate an imminent market downturn.

What is the importance of maintaining an open mind about market outcomes?

Maintaining an open mind about market outcomes is crucial for unbiased decision-making, allowing investors to adapt to a wide range of potential scenarios rather than being anchored to a single narrative or outcome.