by Jason Bodner
May 6, 2025
Stocks always seemed to rise in the 1990s, when I was young, but in 1998, when I was 24, the stock market was in a tailspin. The S&P 500 fell almost 20% in less than three months. The Asian Financial Crisis lined up with Russia defaulting on its debt. These events put immense pressure on a hedge fund named Long Term Capital Management (LTCM), founded by financial geniuses like John Meriwether and two 1997 Nobel prize-winning mathematicians, Myron Scholes and Robert Merton. If the Scholes name sounds familiar, it’s because he co-authored the famous Black/Scholes equation for pricing options. It is still widely used as the main options pricing model for the $1 quadrillion-dollar derivatives market.
LTCM enjoyed years of stellar returns and swelling Assets Under Management (AUM). All that came to a crashing halt in the fall of 1998 when the firm lost over $4.6 billion due to the confluence of the above-mentioned events. All the math skills and brain power in the world couldn’t save them, and the fund needed a federally organized bailout by private parties to stave off a global financial collapse.
It felt like an unprecedented calamity… but the market survived and thrived: the S&P 500 went on to rally by over 60% before reaching its peak in March 2000. More dramatically, the S&P 500 gained over 25% between its low on October 7th 1998, and Thanksgiving that year – in just seven weeks.
While geopolitical events are different, 2025 is a similar scenario. The S&P 500 fell a similar near-20% peak-to-trough this year, on a closing basis and -21% to its intraday low. Despite its recent 15.4% rally from its lows, it is still down 7.5% from the peak and down 3.3% for 2025, through last Friday’s close.
In times of trouble, it always feels different. Just as the 1998 threat of a financial system collapse felt different to me then, Trump’s trade war fueling global recession fears feels different. My bold take: It’s not. And we will be fine. And don’t just take my word for it, the market has already begun telling us so:
The post 5-6-25: My Stock Market “Baptism of Fire” Was in 1998 (When Was Yours?) appeared first on Navellier.
