Over the past three months, the S&P 500 has fallen 7.96%, while the US Dollar Index (DXY) has dropped 8.99%—an exceptionally rare occurrence in financial markets. A simultaneous decline of over 7% in both the equity and dollar markets has only happened eight times since 1973. Notably, it coincided with major financial events such as Black Monday (1987), yen carry trade unwinding (1998), the dot-com crash (2002), and the global financial crisis (2008).
Among these, three key instances—Oct 31, 1978, Aug 23, 1990, and Oct 6, 1998—stand out. The 1978 event was followed by a 10.22% return over the next year, while the 1998 episode produced an exceptional 34.61% recovery over 12 months as global systemic risk quickly dissipated.
However, historical data suggests that apart from the 1998 rebound, most dual-drop instances were followed by further declines or extended periods of sideways trading before recovery began. The 1998 case appears to be the exception, not the rule.
The current dual selloff is also open to multiple interpretations. As in past episodes, it has emerged amid rising global tensions—this time fueled by uncertainty over the Trump administration’s tariff policies. Some analysts believe this is triggering capital flight from US assets, potentially signaling broader international capital realignment.
As such, the recent dual decline could signal deeper market weakness ahead, much like past episodes. Instead of rushing to buy the dip, investors may consider gradual accumulation strategies with risk controls in place, while closely monitoring global economic trends and policy developments.
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Core16 may hold positions in the stocks mentioned in this post and may buy or sell them at any time.
