Recent market volatility has dredged up memories of previous times of turmoil, most notably the 2008 crisis. But Gina Martin Adams of Wells Fargo Securities has been reminded of another, less dramatic correction year — 1998. Adams posits that the current economic environment is suffering from themes that also played out in 1998, including falling oil prices, a rising U.S. dollar and troubles in emerging markets. Consequently, stocks may see a similar move to the 1998 correction, which saw a 20 percent drop for stocks over six weeks.
“Despite these somewhat worrisome signals from the intermarket, the broader economy appears to be holding up reasonably to struggles of the oil and gas complex, deteriorating export growth, and evidence of manufacturing recession, suggesting domestic recession is still likely to be avoided,” Adams, an institutional equity strategist, wrote in a Thursday note. She believes that although a correction this year would likely be more drawn out and less extreme, large-cap stocks may see another 8 to 10 percent decline. FULL REPORT