It’s difficult writing market articles of a longer-term perspective, since readers can interpret the content many different ways. Yesterday, this weekend article was written since bull markets usually run out of years – as Dana White, the UFC President and Founder would say about the incredible athleticism and toughness of the fighters that inevitably age – “Father Time remains undefeated”. The clock runs out on us all, and secular bull markets are no exception.
As yesterday’s article detailed, the SP 500 charts dating back to the late 1920’s show the SP 500 nearing the top of the long-run channels. However let’s say you were around in June, 1999, and took a look at the SP 500 and the Nasdaq and thought about the run that large-cap growth and technology had since January, 1995, and decided you were moving entirely to cash, you would have missed a 100% rally in the Nasdaq 100 that started early October ’99 and ended March 10th, 2000. Yes, you read that right, that was a blow-off top for the Nasdaq in just 6 months and the rally was – not to be too hyperbolic – absolutely insane.
Stan Druckenmiller, the legendary Soros hedge-fund manager and trader, talked about that 6 months from October ’99 to March, 2000, and how he went to cash in early 2000, while the young bucks at his firm stayed long through early March, which apparently forced him back into the market whereby he lost quite a bit of trading capital when the Nasdaq 100 corrected 30% – 35% from March 10, 2000 through early June ’00.
As we near the 4th quarter of 2025, the trading environment – and the presumed feeling from the retail investor that they are mssing out – is nowhere near as stupid and unhinged as it was 25 years ago.
That’s a major positive.
Here’s a few more differences between today and the late 1990’s in terms of the capital market environment:
1.) Today, we are heading for the 3rd consecutive year of double-digit returns for the SP 500 if the 2025’s current capital market returns hold up. As of Friday, September 19th’s close, the SP 500 returned 14.254% YTD, while the Barclay’s Aggregate returned 6.23%, and the 60/40 balanced portfolio returned 11.04% YTD.
The only time that the SP 500 has had 3 years in a row of double-digit returns in a non-Covid period was the strong sequence of +20% returns from 1995 – 1999. The lowest annual return in that 5-year sequence was 1999’s annual return of +21%.
What might be more interesting to readers: simply looking at the arithmetic annual returns for the SP 500, from 1982 to 1999, or the secular bull market prior to this one, the “average” SP 500 return per year was +19.12%. The “average” return for the SP 500 during this secular bull market – i.e. from 2010 to 2024 – is +14.97%. The average return for the SP 500 from 1982 to 2004 was +15.44%.
Net-net, I’d consider the “average return” for the SP 500 in this secular bull market a small positive for “expected forward returns”. There is probably more upside left in the SP 500 this decade, but always manage your risk.
2.) The IPO market: per a Google search, there were 2000 IPO’s in the period from 1995 to 1999. Netscape’s IPO in 1995 really lit the lamp in terms of IPO frenzy and it lasted 5 full years. In 2025 there have been 250 IPO’s (again, per a Google search) and 2025’s number is apparently up materially from 2024.
Is a rush to get a plethora of IPO’s done indicative of a market top ? Well, if you were a founder or CEO of a private company and wanted to enrich yourself with generational wealth, you’d probably want to be a better seller and lock in some of that wealth today rather than remain long, the entire amount of shares.
This too is probably a mild positive for today’s market longevity, given the number of IPO’s, but comparing any period to the late 1990’s probably looks tame.
3.) Interest rates: There is no question interest rates were at a much higher level at the start of the 1982 – 1999 bull market than the start of the 2010 to current period. In late 1985, the 10-year Treasury yield was 11.6%, down from 12.5% earlier that year. Today, i.e. in late 2025, the 10-year Treasury is probably overbought at 4.14%, and needs to work higher (from a yield, not price perspective). In January, 2000, the 10-year Treasury yield closed the month at 6.67%, which is still considerably higher than today’s 10-year Treasury yield.
The point being that the upside from a 10-year Treasury in the next longer bear market, may not be the total return shield that being long or overweight Treasuries in 2000 was for that decade.
Investment-grade corporates help somewhat and add to total return, but with credit spreads at their tightest since the late 1990’s, the threat of spread-widening is a bigger risk than the extra yield spread of 79 – 80 bp’s.
In 2025, the Barclays Aggregate’s 6% YTD return isn’t too bad. Some might smirk, but with two additional fed funds reductions planned in 2025, investors might get better returns than expected coming off of zero interest rates in late 2021 and early 2022.
No question, longer-term the tight credit spreads relative to historical spreads are a negative for fixed-income, particularly credit, and forward returns for Treasuries also seem paltry as well. However, fixed income will likely work into year-end 2025 and 2026, if the Fed continues to favor easing.
Summary / conclusion: Readers / investors / clients have to assume that all secular bull equity (and bond) markets will end. However no one knows what the bear market will look like. 2001 – 2002, and 2008 were very different bear markets even though the SP 500 declined 50% in both periods and the Nasdaq fell 80% in 2001 – 2002.
Michael Kitces, the popular financial planner posted a note on his LinkedIn this weekend, that noted that ” Hot mutual funds and ETF’s that experience strong performance and related heavy inflows tend to subsequently underperform their benchmark, (with particularly poor performance for many of these funds in recent years).”
All the asset classes that worked for most of the 1990’s i.e. large-cap growth, technology, non-tech growth stocks (even Walmart and Home Depot) basically experienced a “nuclear winter” for the decade from 2000 to 2009. Once vaunted growth stocks and tech ETF’s (like the semiconductor ETF, SMH), were underwater for 10 – 15 years.
What wouldn’t work in the 1990’s, like international, emerging markets, small-cap, “value” investing, which generated 5% – 10% returns in a market that generated or averaged 20% returns, suddenly sprang to life after March 10, 2000 and had record runs for years, or until 2007 – 2008.
Hence, pay attention to what’s not working, or generating low annual returns today. It’s tough to explain to clients why you might be selling Nvidia, Broadcom, and Micron Technology, but show clients the annual returns of the 5 hottest stocks in the late 1990’s, after March, 2000, (GE reportedly made it’s first all-time high last week, since 2000, and Cisco is getting to within shouting distance of it’s April, 2000, all-time high of late, so these two stocks have been underwater for 25 years.) Look at Apple (AAPL), which has struggled with the AI transition and is on it’s 17th iPhone edition. AAPL is down 1% – 2% YTD as of last Friday’s close in a decent market for tech stocks.
Every growth story ends, some harshly and some peter out slowly, like a Coca-Cola (KO).
One of my favorite places for new cash is emerging markets (EM). We were too early buying last decade, when in 2017, Fidelity published an article noting that the 10-year annual return for EM was negative, after the asset class had a stellar decade from 2000 to 2009. That’s a good sign. Xi Jinping, China’s Communist Party Premier pulling the plug on the Ant Financial IPO in the latter part of last decade, was the sign to stay clear of China, so the iShares Emerging Market ex-China ETF (EMXC) is the biggest EM holding for clients. The asset class deserves a longer post, and one will be forthcoming.
The Russell 2000 made it’s first new the last week, for the first time since late 2021. That’s an asset class of interest as are mid-caps, or the SP 400.
None of this is advice or a recommendation, but only an opinion. Past performance is no guarantee of future results. Readers, clients, investors should evaluate their own comfort with their portfolio volatility and make adjustments if needed.
Will this bull market end and the next bear market exactly resemble the 2001 – 2002 period ? That’s very doubtful, but there will likely be many similarities.
Thanks (again) for reading.