History Rhymes-Part 1: The Warning Lights We're Watching

Zeke Kelly • October 31, 2026

Why this series, and why now?


Most weeks, our best advice is to tune out the headlines. The past few weeks have been different. No single headline was alarming on its own, but several arrived at once.


  • A record that was quickly tested. The S&P 500 closed at a record on October 5. Less than two weeks later, the Nasdaq had its worst week since late June, falling 4.5% as investors rotated out of AI stocks.


  • Inflation came in hot. On October 14, the Bureau of Labor Statistics reported consumer prices up 3.7% over the past year, led by energy, with core inflation steadier at 2.6%. The next day, producer prices, what businesses pay, jumped 1.3% in a single month. That was roughly double what economists expected and the largest monthly gain since March 2022. Then on October 29, the Fed's preferred inflation gauge (PCE) showed prices up 3.6% over the past year.


  • Oil and rates climbed. Oil moved above $100 a barrel amid tensions in the Middle East. The 10-year Treasury yield reached about 5.3%, its highest since 2002, before easing back below 5%.


  • The Fed held, but not comfortably. On October 28, the Federal Reserve left rates unchanged, while two of its voting members argued for another hike


  • Then a rebound, and a rough finish. Stocks bounced back through late October, with the Nasdaq up 0.8% on October 26 alone. Then disappointing results from Alphabet and Amazon, and a weak outlook from Intel, revived worries about whether heavy spending on AI will pay off. On October 30, the last trading day of the month, the S&P 500 fell 1.8% and the Nasdaq fell 2.9%, the Nasdaq's worst day since early June. For the month, the Nasdaq lost about 5%, its worst month since March 2025, while the Dow gained about 1.5%. It's a reminder that markets rarely move in a straight line, and that a handful of companies can move the whole index.


Framing the series


Many of you have asked us some version of the same question:


"if the market is at record highs, why does it feel so uneasy?"


We think that question deserves more than a quick answer. Over the coming weeks, our History Rhymes series will compare today's market with past cycles, such as the dot-com era and 2022, to show what looks familiar, what's different, and what it could mean for your portfolio.


We're starting while markets are still near their highs for a simple reason: we would rather explain our thinking before markets force a decision than after. If our defensive process kicks in at some point, we want you to already know why it exists, what it does and what to expect. None of this means a downturn has started, and we are not predicting one. It means the odds of a bumpier stretch have gone up, and now is the right time to talk about it.


Record highs that don't feel like records


On paper, this has been a strong market. The S&P 500 set a new record on October 5. Yet it hasn't felt like one, and many of you have told us the same. Records usually come with a sense of calm. This one has come with sharp swings, like the Nasdaq's 2.1% drop on October 16 followed by a 1.1% rebound the next trading day, and with more worry than celebration.


A few things explain the disconnect:

  • Most stocks aren't at records. While the index hit new highs, about 84% of the stocks in it were at least 10% below their own highs. The average stock, and many portfolios, may not feel the record at all.


  • A few companies are doing the heavy lifting. When a small group carries the index, good news lifts the headline number, while bad news from that group can knock it down quickly.


  • Our own gauges agree. StormGuard is still positive, which means the broad trend remains up. But that reading has stopped strengthening in recent weeks, and the part of our system that watches for sudden market stress has risen to its highest level since spring.


So what?

A market can keep climbing on a narrow base for a long time. But when there is more fear than excitement at a record high, it often signals that gains are more fragile: fewer stocks are carrying the load, and investors are quicker to sell on bad news. That doesn't tell us whether or when a decline will come. It tells us this is a good time to make sure the plan is in place, which is what the rest of this piece is about.


The three warning lights on our dashboard


Think of these as dashboard lights, not sirens. Each has appeared before past downturns, and each has also appeared before markets kept climbing.


1. Inflation is heating up again

What businesses pay today often shows up in what consumers pay later. The gap between headline inflation (3.7%) and core inflation (2.6%) tells us energy is doing much of the work right now. Energy-driven inflation can fade quickly if oil prices settle, or it can spread into everything else. That is the part we are watching.


2. Rates are rising, not falling

The Federal Reserve raised rates in September, its first increase since 2023. On October 28, it held rates steady at 3.75% to 4%, but two of its 12 voting members wanted another hike, and its statement said that "inflation remains elevated." The door to further increases remains open. The 10-year Treasury yield reached about 5.3% earlier this month, its highest level since 2002, and has since eased to about 4.93% as investors moved toward bonds for safety during the late-October sell-off. Higher rates raise borrowing costs for families and businesses, and they can make stock prices harder to justify, especially for growth companies valued on earnings expected years from now.


3. The market is narrower than it looks

As noted above, about 84% of S&P 500 stocks were at least 10% below their highs as of October 13, even with the index at records. Bank of America estimates the 10 largest AI-related stocks now make up about 40% of the index. That means a stumble in one group, like this month's tech sell-off, can pull the whole market down with it, even when most other companies are doing fine.


Why history rhymes


"History doesn't repeat itself, but it often rhymes." The line is often attributed to Mark Twain, though there is no record he said it. Either way, it fits markets well. No two cycles are the same, but some patterns come back.


Early 2000.

Tech and telecom stocks made up about 41% of the S&P 500. After the market peaked in March 2000, the S&P 500 fell 49% and the Nasdaq fell 78%. Today's roughly 40% concentration in AI-related stocks is the closest parallel since then, and since the "Nifty Fifty" of the early 1970s.


2022 Bear Market.

Inflation surged and the Fed raised rates quickly. Stocks and bonds fell together, so the traditional cushion of owning bonds alongside stocks did not work the way many investors expected. Today's mix of firmer inflation and rising rates rhymes with that year. That is why we do not assume bonds alone will soften the next decline. So far this fall, bonds have helped: as stocks slid on October 30, Treasuries rallied. Part 2 of this series looks at when that cushion has held and when it hasn't.


What this does not mean


  • We are not predicting a crash or a recession. Signals like these have flashed before while markets kept rising, sometimes for years.


  • Concentrated markets can stay concentrated. Strong companies can grow into their valuations.


  • Inflation can cool. If energy prices settle, this week's numbers may look like a blip.


  • Selling everything to wait it out carries its own risk. Some of the market's best days have come close to its worst, and missing them can be costly.


Our point is simpler. The odds of a bumpier stretch have gone up, and we would rather prepare calmly now than react in a hurry later.


A word on the midterm elections


The midterm elections are this Tuesday, November 3, and they add one more source of noise to an already jumpy market. Here's what history suggests, without regard to which party wins.


  • Volatility tends to build into the vote. In midterm years since 1946, market swings have tended to rise through the summer and into October, as uncertainty about the outcome peaks.


  • Markets have often done well afterward. Since 1950, the S&P 500 has gained an average of 15.4% in the year after a midterm election. Much of that has come from uncertainty clearing, not from which party won.


  • Averages aren't promises. Recent midterm years show the range: the S&P 500 lost 4.4% in 2018 and 18.1% in 2022. This year, inflation, interest rates and the concentration in big tech may matter more to markets than the election itself.


  • Investing by party has been costly. BlackRock's research found that investors who moved to cash based on which party held power fell well behind those who stayed invested.


For us, the election is another reason to follow a process rather than the headlines. StormGuard reads how the market is actually behaving, not polls or predictions, and it responds to sustained trends rather than a single day's reaction to election results.


How we're prepared with StormGuard


We don't try to predict the next downturn. We plan, in advance, how we will respond to one.


StormGuard watches the market every day.

Our tactical Dual Defense™ portfolios use StormGuard, a market-direction model developed by AlphaDroid® and licensed to Canopy. It is assessed daily. As of its October 30 month-end reading, StormGuard remains positive, so our tactical portfolios stay in their normal, growth-oriented positioning, which we call Bull Mode.


Earlier this year, StormGuard moved to defense in late February and back to growth in mid-April, so this is a process it has already worked through once in 2026.


If StormGuard turns negative:

  • Bear Mode: Each strategy shifts to its own Bear Market Strategy (BMS). Each BMS selects the trend leader from a pool of up to 12 candidates, and cash is always an option.


  • TrendGuard: Within each category, a second layer favors the holdings with the strongest relative strength.


  • Human judgment: Signals inform our decisions; they don't make them automatically. Zeke reviews the broader environment before moving client portfolios and may phase changes in rather than shifting everything at once.


Taxable accounts.

Taxable (non-retirement) accounts are handled case by case. Selling in a taxable account can trigger capital gains, so a StormGuard signal is one input, not an automatic trade. We look at each client's holdings, cost basis and tax picture, and at how you prefer to handle a downturn: some clients would rather sit tight, while others want to move part of their portfolio toward safety. Any changes are typically partial and made with taxes in mind.


What this means for you.

If you see changes in your accounts in the weeks ahead, that is the plan working, not a sign of panic. A defensive move is not a forecast that things will get worse. It is a way to seek to limit losses if they do. The trade-off is that we may be a step behind when the market turns back up, a cost we accept knowingly.


Where opportunity can appear


Downturns are not only about playing defense. They can also open doors.


Inside our Bear Market Strategies.

When StormGuard turns negative, each BMS looks for the leader among assets that have tended to hold up better in weak markets, such as defensive sectors, along with cash. Our three main versions range from more growth-oriented to more defensive, so each portfolio's response matches its overall risk level. Because a BMS follows the trend leader, what it holds in a bear market can look very different from today.


Strategies with built-in downside features.

Bumpy markets often bring renewed interest in products designed to limit losses in exchange for giving up some upside. Two that clients ask about:


  • Structured notes may offer a buffer or barrier against a set amount of market decline, in exchange for capped upside over a fixed term. When volatility and interest rates are higher, the terms on new notes can sometimes be more attractive.


  • Fixed and fixed indexed annuities may offer principal protection backed by the issuing insurance company, and higher interest rates can improve the rates and caps insurers offer. Annuities are offered by Zeke in his separate capacity as a licensed insurance agent, not through Canopy Financial Solutions.


Know the trade-offs.

  • Structured notes: depend on the issuer's credit, can be hard to sell before maturity, cap your upside, usually pay no dividends, and offer only limited downside protection. You can lose principal.


  • Annuities: can carry surrender charges, fees and withdrawal limits. Guarantees depend on the insurer's claims-paying ability, and Zeke may earn a commission, which is a conflict of interest.


  • Bear Market Strategies and tactical moves: may lag market turns, can trail buy-and-hold in sharp rebounds, may trade more often, and defensive holdings can still lose value.
None of these is right for everyone. Whether one fits depends on your timeline, income needs and how much access to your money you need. 

Coming next in History Rhymes


  • Part 2, Stocks and bonds: 2000, 2008 and 2022, and whether bonds can still cushion a fall


  • Part 3, Concentration: the Nifty Fifty, the dot-com era and today's AI leaders


  • Part 4, The dollar and gold: what the safe havens are signaling


  • Part 5, Recession signals: the yield curve and the 2027 question


If this week's headlines have you wondering about your own accounts, reach out. We're glad to walk through how your portfolio is positioned and what would change if StormGuard turns negative.

These are conversations I'm open and eager to have, especially as we near the year's end.



Important disclosures

Advisory services offered through Canopy Financial Solutions, a North Carolina registered investment adviser. Registration does not imply a certain level of skill or training. This material is for informational purposes only and is not a recommendation to buy or sell any security or strategy. Investing involves risk, including loss of principal, and past performance does not guarantee future results. Opinions are as of the date of publication and may change. Full disclosures and our Form ADV: canopyfinsol.com/disclaimers.


Dual Defense™, StormGuard and TrendGuard are models developed by AlphaDroid® and licensed to Canopy. Tactical strategies may lag market turns, trade frequently, trail buy-and-hold in strong rallies, and defensive positions (cash, bonds, gold or inverse funds) can lose value. Indexes are unmanaged, do not reflect fees, and cannot be invested in directly.


Third-party data is believed reliable but not guaranteed. Bond prices fall when interest rates rise, and bonds carry inflation and credit risk. Structured notes carry issuer credit risk, limited liquidity, capped upside and limited downside protection; principal may be lost.


Insurance products are offered by Michael “Zeke” Kelly in his separate capacity as a licensed insurance agent (NPN 18965045) through The Cason Group, Megastar Advisors and other insurance marketing organizations (IMOs/FMOs), not through Canopy Financial Solutions. Mr. Kelly may receive commissions on insurance sales, which creates a conflict of interest. Guarantees are based on the claims-paying ability of the issuing insurer. Annuities may involve surrender charges, fees and limits on withdrawals.



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