TL;DR: The S&P 500 is up 84% over the past 3 years. Historically, this either means we're about to face-plant into a brutal correction... or we're heading for an epic multi-year rip. The deciding factor? The Fed.
The Setup
Three years ago, the S&P 500 was having a terrible day. Actually, a terrible year. September 2022 marked the bottom.
Fast forward to today: +84%.
Since 1927, we've only seen this kind of 3-year rocket ship seven times. And spoiler alert—they didn't all end well.
What Happened Last Time?
When markets go parabolic like this, history shows two possible outcomes:
The Bad Timeline:
1927, 1987, 2021 → Markets topped fast and crashed hard
Average drawdown after these signals? -35% 😬
The Good Timeline:
1997 → Market said "lol watch this" and kept ripping for nearly 3 MORE YEARS
So which one are we living in?
Where to Invest $100,000 According to Experts
Investors face a dilemma. Headlines everywhere say tariffs and AI hype are distorting public markets.
Now, the S&P is trading at over 30x earnings—a level historically linked to crashes.
And the Fed is lowering rates, potentially adding fuel to the fire.
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Why?
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The Fed Is the Main Character
Here's the pattern: Every single time the market crashed within 6 months of hitting this signal, the Fed was either raising rates or about to start.
When the Fed was cutting or chilling? Rally kept going.
Examples:
1927: Fed cutting → market partied until rate hikes arrived, then... Great Depression
1997: Fed on pause → 34 more months of gains before the dot-com bust
2021: Fed hiking → 2022 happened (RIP portfolios)
Where We Are Right Now
Plot twist: The Fed is cutting rates right now. And they're signaling more cuts ahead.
That makes today look way more like 1936 or 1997 than the 2021 disaster.
Translation:
✅ Stocks could keep melting up for 12–18 more months
⚠️ But the longer this goes, the uglier the eventual crash tends to be
The longer easy money pumps the market, the more froth builds up. And when it pops, it pops.
So... Buy or Sell?
Look, we're not fortune tellers. We've got like 7 historical examples to work with here—not exactly a massive sample size.
What we know:
Price action is strong ✅
Moving averages pointing up ✅
Fed easing = fuel for the rally ✅
Short-term dips? Sure, always possible. But the bigger picture still leans bullish... until it doesn't.
The second price breaks key levels or the Fed pivots back to hikes, we flip our stance. It’s about staying flexible, not being married to a thesis.
The Bottom Line
We're at a historical crossroads. Bulls see 1997. Bears see 2021.
The Fed holds the remote control.
As long as rates keep dropping, this melt-up could burn even hotter. Just remember—the longer the party goes, the worse the hangover.
Stay sharp. Stay liquid. And don't get too comfortable.