A Low Price to Pay for a Mega Melt Up

Editor's note: The first two months of 2025 have been chaotic. But according to Keith Kaplan, CEO of our corporate affiliate TradeSmith, we're in the middle of a "Mega Melt Up"... with tremendous gains ahead. So today, we're sharing an excerpt from the February 27 issue of Keith's TradeSmith Daily e-letter. In it, Keith explains why this Mega Melt Up could be even bigger than the ones we've seen in the past...

The market is taking us on a wild ride in 2025.

The headlines have been all over the place. And stocks are reacting as you'd expect – soaring one week and shaking out weak hands the next.

As I write, the tech-focused Nasdaq 100 Index is down 2.8% from the start of the year. That's tough, considering the 5.5% year-to-date gain we were looking at two weeks ago.

You likely can't help but wonder, "Are we heading for a crash?"

If you googled that question, you'd probably find plenty of headlines urging you to stay scared. But I'm here to tell you something different...

This isn't the beginning of a bear market. On the contrary, it's the setup for one of the biggest opportunities of your lifetime.

That's because we're smack in the middle of what my team has taken to calling a "Mega Melt Up."

We've quantified the price action of the past few years. And shockingly, we found that there have only been two previous market environments like this one: the 1990s and the 1920s.

In both periods, individual stocks rose thousands of percent in short order.

If our research is correct – and I'm confident it is – the volatility we've seen this year isn't a warning sign.

Instead, it's even more evidence that we're in a Mega Melt Up... the kind that only comes around once or twice in a lifetime.

Let's take a quick trip back in time...

Like what we've seen so far in the 2020s, the 1990s were a boom decade.

From 1995 to 2000, the Nasdaq 100 soared 1,000%. But it wasn't a straight shot up. In fact, those five years included more than two dozen major pullbacks... several of which you could consider "official" bear markets.

And each proved to be a buying opportunity.

We'll start by looking at 1995 to 1996...

Between July 1995 and August 1996, the Nasdaq 100 posted drawdowns of 9.1%... 10.5%... 14%... 8.2%... and 14.4%. And again, all of this was in a little more than a year...

What else happened back then? Well, in 1995, the Nasdaq 100 soared more than 40% in total... including the pullbacks. And the next year, it rose 42.5%.

Between 1997 and 1998, we saw the exact same thing.

Not only did the Nasdaq 100 retreat 20% in late 1997, creating a short-lived bear market... but it also saw two separate drawdowns of 22% and 19.1% within six months in 1998. Take a look...

Yet once again, the index went up 20.6% in 1997... and 85.3% in 1998.

Finally, let's look at 1999. We saw four major pullbacks in the double-digit range and one last tumble of nearly 9% before stocks took off into the end of the year...

And in 1999, the Nasdaq 100's return was 102%... the highest ever.

The big takeaway is simple: You can't have a Mega Melt Up without massive price swings along the way.

This is exactly what we found in our research. The Mega Melt Ups in the 1990s and the 1920s were marked by volatility.

That's the cost of the extraordinary gains that markets can deliver in these times. And when you zoom out, it's clear that it's a small price to pay.

Right now, the S&P 500 Index is 5% off its highs, and the Nasdaq 100 is 8% off its highs.

These indexes could absolutely go lower from here... and it wouldn't change my thinking on this Mega Melt Up one bit.

In fact, the Melt Up we're about to see could be even bigger than the one in the '90s.

The 1990s had three powerful forces fueling stocks...

1. The birth of the Internet, with new companies taking advantage of the trend.
2. The rise of online trading, which made stocks more accessible than ever.
3. Easier monetary policy, where the Federal Reserve's interest-rate cuts fueled a consumer-credit boom.

These three forces are what we call "Melt Up Multipliers." For a Melt Up to be truly powerful, it must have these specific three factors.

The 1920s saw the same thing, with electrification being the major technological breakthrough... margin lending making it possible for investors to own more stocks than they could buy... and a consumer-credit boom powering the economy.

Today, we have these same three Melt Up Multipliers... and one more:

1. Artificial Intelligence: AI is today's Internet moment – a technology that's changing everything, from medicine to finance.
2. Zero-Commission Trading and Apps Like Robinhood: More retail money is flooding into the markets than ever before.
3. The Fed's Rate Cuts: The Fed is slashing rates again, just like it did in the mid-'90s.

That "wild card" fourth Melt Up Multiplier is President Donald Trump. Whether you like him or not, the last time he took office in 2017, the Nasdaq 100 surged 31.5%. And it's possible his second term will turn out to be a tailwind for stocks again.

This is the perfect recipe for a Mega Melt Up. Just remember, you must understand one critical thing about Melt Ups... and especially Mega Melt Ups...

They all end the same way – in a meltdown.

All the best,

Keith Kaplan

Editor's note: Since 1900, a rare market pattern has only appeared two other times. It's happening again today... And that points to a shocking event that could unfold in the next 12 months. Today, Keith is stepping forward to share a powerful new algorithm that could help you take advantage of this rare opportunity – and avoid the danger building inside the markets right now. Click here to learn more.