MARKET CORRECTION TIMING APPEARS IMMINENTThe chart provides a compelling historical perspective of major S&P 500 corrections and their relationship with Federal Reserve interest rate cycles. It highlights three significant market downturns (the shaded areas in red): the Dot-com Bubble (-49%, March 2000 - October 2002), the Global Financial Crisis (-57%, October 2007 - March 2009), and the COVID-19 Crash (-34%, February 2020 - March 2020).
A notable pattern emerges when examining the relationship between these market corrections and interest rate peaks - market downturns often follow periods where interest rates have reached their cyclical highs.
The blue line (in the chart below) representing the Effective Federal Funds Rate shows clear peaks before each of these major market corrections, suggesting a historical correlation between rate cycle tops and subsequent market pullbacks.
Given that current Federal Reserve rates appear to have peaked around 5.5% and started to decline, historical precedent suggests we could be approaching a correction phase in the relatively near term.
The chart's pattern indicates that once rates stabilize at their peak, as they have recently, the window for a potential market correction typically opens within a matter of months.
However, while this pattern is interesting from a historical perspective, it's important to note that past patterns don't guarantee future market behaviour, and many other factors contribute to market corrections beyond just interest rate cycles. In my opinion we may be just missing a catalyst? Was this week DeepSeek correction the start of it?
Only time will tell. Keep nimble! Keep cautious!
