Benjamin Cowen explains that markets do not top suddenly, they form a topping process. He believes the S&P 500 may be entering a distribution phase, similar to past late-cycle environments.
Key Points
Key Highlights:
- The recent 10% drop followed by a strong rally is typical late-cycle behavior, often seen before major tops
- Market tops usually form slowly over time, while bottoms happen quickly as single events
- The S&P 500 could still make new all-time highs, but that does not mean the bull trend is intact
- Bitcoin shows a similar pattern, where new highs were followed by a long distribution phase before breaking down
- Late business cycle markets often move sideways at highs, with repeated rallies and drops that confuse investors
- Historical examples like 2000 and 2007 show similar patterns, multiple attempts at new highs before a larger downturn
- A key risk is a prolonged “distribution phase” where markets stay near highs for months before eventually dropping
- If this plays out, investors may become overly bullish right before a recession hits
Final Takeaway
Cowen’s view is that the market may still go higher short term, but the bigger picture is a topping process. If history repeats, this phase could lead to a deeper correction later.
