MW This 'uncanny' S&P 500 chart suggests a bubble is bursting - and not just because of Iran
By Mark Hulbert
Iran and oil may have broken the stock market - but the cracks were already visible
Even before the U.S. and Israel attacked Iran on Feb. 28, a scary chart parallel had emerged between the S&P 500 SPX currently and the index's behavior in early 2000 - just before the dot-com bubble burst.
Some analysts object to even considering this possibility. The stock market's drop, they say, is due to the Middle East conflict and the surge in oil (CL00) prices. But the distinguishing characteristic of a bubble is not the particular straw that breaks the camel's back; it's the conditions that make the market so vulnerable in the first place.
Make no mistake: The S&P 500 was extremely vulnerable well before the U.S. and Israel attacked Iran. Writing in late February before the outbreak of the Middle East hostilities, Vincent Deluard, director of global macro strategy at StoneX Group $(SNEX)$, noticed similarities between the S&P 500 now and the index's behavior then.
"This topping pattern is evident in the slowing momentum of the S&P 500 index in the past five months, the steady increase in volatility, and the underlying rotation towards small-cap and value stocks," Deluard noted.
Deluard illustrated the parallel in the chart above. Deluard admitted that drawing chart analogies is the functional equivalent of "astrology." Nonetheless, he added that "the parallel to the late '90s is uncanny."
Even if you don't put much weight on chart analogies, Deluard said that we should be paying attention to the many signs of an imminent market top. According to Deluard, investors are making the mistake of thinking that bull-market tops are the mirror image of bear-market bottoms, when they are not. Said Deluard: "Markets famously take the stairs up and the elevator down. Market bottoms often snap back in a sharp V-shape, while bull markets erode slowly."
Too calm about volatility
Higher volatility is bearish.
Deluard said many investors are overlooking increased U.S. market volatility because of a factor that keeps it largely hidden: The unusually low correlation between individual stocks.
To show the consequence of a low correlation, Deluard calculated - for each day since 2010 - the average correlation between the 100 largest stocks' 50-day returns, finding it to have recently fallen to an all-time low of just 8.5%. He also found that this average correlation tends to mean-revert, suggesting it will soon be back to its 15-year average of between 30% and 40%. Mathematically, a higher correlation between individual stocks that are themselves volatile will automatically translate into higher volatility in the overall market.
This does not bode well for stocks, Deluard continues, because "higher volatility is bearish by itself ... It forces dealers to shrink their books, traders to reduce capital, and risk-parity funds to cut leverage."
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com
More: Oil prices are the No. 1 thing investors are watching right now. Here's why.
Plus: Fed 'utterly paralyzed' as Iran conflict stokes stagflation fears
-Mark Hulbert
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March 14, 2026 13:30 ET (17:30 GMT)
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