Although the S&P 500 has slipped just 5.11% from its peak, the damage has been more severe across individual stocks, particularly in the technology sector. On Thursday, more than 57% of S&P 500 technology constituents had fallen into a bear market, defined as a 20% decline from an annual high, the highest proportion of any sector.
What really jumped off the chart for us was that after soaring to 90% in April, the percentage of stocks in a bear market dropped to 28% and has now climbed back to 57%, a departure from the usual sequence. Typically, it slides below 15%, even if it takes some time. In digging through the data, I found three comparable cases.
The three precedents occurred after drawdowns in 1987, 1990, and 1998. The first two unfolded during what many would consider a secular consolidation period for technology, spanning 1987 to 1994. The third followed the 1998 LTCM correction and coincided with the Dotcom era, arguably the best comparison to today’s AI innovation cycle. That period featured a choppy but upward bias in tech from February to October 1999, which eventually evolved into an extraordinary rally culminating in the March 2000 peak.
Will history repeat?
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