The search results point to a specific comparison made by Paul Hickey, co-founder of Bespoke Investment Group, who noted parallels between the stock market performance in 2025 and that of 1998. Here’s a breakdown of the context and potential parallels based on available information:
In 1998, the U.S. stock market experienced a significant pullback, largely driven by the Asian financial crisis, the Russian financial crisis, and the collapse of the Long-Term Capital Management hedge fund. These events led to heightened market volatility and a sharp but temporary decline in the S&P 500. Despite the turbulence, the market recovered relatively quickly, continuing its upward trajectory into the late 1990s dot-com bubble.
Hickey’s observation, as reported by CNBC on May 29, 2025, suggests that the S&P 500’s recovery track in 2025 mirrors the dynamics of 1998. Key parallels could include:
- Market Volatility and External Shocks: In 1998, global economic crises triggered market instability. Similarly, 2025 has seen significant market disruptions, notably a sharp S&P 500 decline of over 10% in two days in April, driven by President Trump’s tariff policies and retaliatory tariffs from China. This led to a tech-heavy Nasdaq Composite entering bear market territory, reminiscent of the rapid declines seen in 1998.
- Tech Sector Dominance: Both periods feature a strong influence of technology stocks. In 1998, the internet-driven dot-com boom fueled market gains, with technology stocks accounting for 74% of market gains in the two years leading to March 2000. In 2025, the “Magnificent 7” (Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, Tesla) have driven much of the market’s gains, though their contribution is slightly less concentrated at 56% from March 2023 to February 2025. The 2025 pullback in these mega-cap stocks, averaging a 15.5% decline year-to-date through March 18, echoes the volatility of tech-heavy markets in 1998.
- Strong Fundamentals Amid Pullbacks: In both eras, underlying corporate fundamentals remained relatively strong despite short-term market corrections. In 1998, the market’s recovery was supported by robust U.S. economic growth. In 2025, despite tariff-related fears and recession concerns, economic indicators like the March jobs report (228,000 jobs added, exceeding forecasts) suggest resilience, similar to the recovery dynamics post-1998. Additionally, 2025’s top-performing firms show higher profitability and stronger revenue growth compared to their dot-com counterparts, suggesting a more measured rally than in the late 1990s.
- Investor Sentiment and Corrections: Both periods saw high investor optimism preceding corrections. In 1998, exuberance around tech stocks set the stage for a pullback. In 2025, analysts like David Laut of Abound Financial noted that high valuations and investor FOMO (fear of missing out) made the market vulnerable to negative news, predicting a potential 15% pullback early in the year, similar to the 1998 correction.
However, there are differences. The 1998 pullback was driven by global financial crises, while 2025’s volatility is heavily tied to U.S. policy changes, particularly tariffs, and their global repercussions. The 1998 market was more volatile (projected risk around 20% vs. 15% in 2025), and the dot-com bubble’s valuations were less grounded in fundamentals compared to today’s AI-driven market.
Critical Note: While Hickey draws parallels, the 2025 market operates in a unique context with modern complexities like AI, geopolitical tensions, and fiscal policy shifts. The comparison to 1998 may highlight similar patterns of volatility and recovery, but the drivers (tariffs vs. global financial crises) and market structures differ. Always question broad historical analogies, as they can oversimplify current dynamics.
For further details, you can refer to the CNBC article from May 29, 2025, discussing Hickey’s analysis. If you’d like me to dig deeper into specific aspects (e.g., economic data, tech sector performance, or policy impacts), let me know