Karl Marx once said, “History repeats itself, first as tragedy, second as farce.”

If you want a clue as to how the economy and market will act during the coming recession, you need look no further than the charts for 1998-2003.

In the last quarter of 1999, U.S. GDP grew 7.3%, unemployment was 4% and change, and the 100 biggest companies in the U.S. (if not the world) were putting in all-time highs virtually every day.

One year later, the economy was dipping into recession (much as we are today). But unemployment (which would eventually crest 6%) was still below 4%.

And the supposedly forward-looking S&P 100? Its blue-chip stocks had only given up 25% of their value, a mere half of the 50% these titans of industry would eventually lose before turning the corner.

Today, we are just dipping into the recessionary “red zone.” Unemployment has already hit the 5% marker. And the U.S. blue chips have “only” lost some 10%-15% of their value, less than half the losses history warns of.

Will this cycle end tragedy or comedy? That all depends on how well you prepare for the next downturn.

Adam Lass
Senior Editor, WaveStrength Options Weekly

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