Fidelity executive Jurrien Timmer warns that the surge in the stock market fueled by the AI boom shows similarities to the late-1990s market.
In a new post on X, Fidelity’s director of global macro says the AI-driven S&P 500 surge since 2022 appears to mirror the index’s price action from 1994 to 1998 with a minor difference.
According to Timmer, the stock market’s recovery following the tariff tantrum in April mirrors the S&P 500’s rally in 1998 after Long-Term Capital Management (LTCM), a highly leveraged hedge fund, failed spectacularly primarily due to global financial market turmoil.
“Whether the AI boom turns into a melt-up in which more and more companies get caught up in the AI mania (deservedly or not) remains a juicy question. Given the close proximity to the 1994–2000 analog, I am prepared for this scenario to become a reality.
We can see from the ‘fragmented’ analog below that while the 2022-2025 period has closely resembled the post-1994 soft landing bull market (until 1998), the past six months (following April’s 21% tariff tantrum) closely resembles the post-LTCM melt-up in 1998–2000.”
Timmer also notes that the Fed looks poised to cut rates in the coming months, striking another resemblance to market conditions witnessed nearly 30 years ago.
“That boom was supported by three rate cuts from Greenspan (following the three in 1995), again providing an analog to the current (and future) Fed. As the analog shows, other than in 1998, the 1994-2000 produced an uninterrupted valuation expansion. It’s quite similar to the past three years.”
The model appears to predict that the S&P 500 expansion will continue until October of 2026 before collapsing.
As of Thursday’s close, the S&P 500 is trading at 6,715.
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