An Odyssey Through Market History

Summary

Andrew Sheets uses the historical parallels of 1997-98 and 2005-06 to argue that the current market cycle shares features like rising corporate capex, surging M&A, deregulation, and similar macro data. He concludes that the cycle likely has further to run, with equities set to outperform credit and volatility worth owning. The analysis frames current tech excitement (AI) and uneven growth as echoes of the late 1990s and mid-2000s.

• The 1997-98 and 2005-06 periods are seen as the best templates for the current market backdrop.
• US capital expenditure is forecast to rise sharply, driven by AI and energy infrastructure.
• Global M&A volumes have rebounded from historically low levels, running up 64% year-on-year.
• Macro data (core PCE, unemployment, 10-year yield) today closely resemble the averages of those past periods.
• Financial deregulation is re-emerging globally, echoing past cycles.
• Rising corporate aggression supports equities over credit and favors owning volatility.
• The cycle probably has further to run, but surprises remain likely.