Party Like It’s 1999

This title comes from the popular Prince song written in 1982. Little did he know at that time how wild 1999 would be as it relates to the stock market. In many ways 2025 reminds us of 1999. In this edition of Market Comments, we will draw parallels between the two periods.

We will also address current talk about lower interest rates and how we at Oxbow see things. Exbibit 1 shows the investment returns of various market measurements for the first nine months of this year ending September 30, 2025.

Years 1999 and 2025: Excited About the Future …

Just about everybody in 1999 was enthusiastic about the new Internet and the fiber that would change the world. Virtually no one could see that a mere two years later things would be different. The investment world was so optimistic about fiber. Accordingly, company after company invested heavily. They even started borrowing money to follow the “fiber craze.” Notice that Exhibit 2 shows the parallel magazine covers from 1999 and 2025 regarding the future growth potential. Both are from September of their respective years.

Today is not a lot different. Artificial intelligence (AI) is front and center on Wall Street. Most everyone today is mesmerized by what the future could be. In many ways it has the same feel as 1999 with merely a different dominant theme. In 1999 almost all investors thought the stock market was overvalued and had given up after three years of nothing but up markets. Similar to today after two years with all those negative thoughts and market extremes, investors have very little to show for it. Notice in Exhibit 3 that the NASDAQ Composite Index starting in January 1999 blossomed into a major price advance by mid-2000 before losing the majority of the gains achieved in early 2001.

Little did investors know that a mere two years later it would all be given back into early 2001. Today we aren’t saying the same thing will happen in the months and years ahead, but things can change quickly. In 1999, like now, the markets trended higher just about every day, for no particular reason. As everyone knows now, the big news is AI. During 1999 all investors had to do was wait and hold stocks, plus withhold a minimal amount of cash as buffer. Believe us, you weren’t very popular then if you talked about selling overvalued stocks (sound familiar?).

It was well known that stocks were overvalued, but people couldn’t help but hold them anyway. They just had to get in. For example, Stan Druckenmiller is one of the greatest investors of all time. He tells the story of early 2000 when prices just kept going up and he kept telling himself, Don’t buy into this crazy market. Finally, he couldn’t keep holding back and invested some $6 billion—almost at the absolute market high. Sad to say, six weeks later he had lost $3 billion. When asked what he learned from the experience, he said, “I didn’t learn anything; I already knew I wasn’t supposed to do that.”

Today we have similar situations where many individual investors and professionals know they are buying high-flying, expensive stocks. As economist John Kenneth Galbraith once said, “Nothing makes people more miserable than watching their neighbor get rich.”

Interest Rates Are Currently Coming Down … Is That Good?

Wall Street in September 2025 got what they wanted from the Federal Reserve as they lowered interest rates by a quarter point. Almost never in the history of the Federal Reserve have interest rates been decreased when there was still nagging inflation. Long-term (20- to 30-year) bond buyers have pushed back on this, basically stating, “We don’t agree.” Notice that Exhibit 4 shows short-term yields starting on January 1, 2025, versus now.

As you can see, the short-term rates in Exhibit 4 (one month to two years) have declined. Meanwhile, the 30-year yields have barely moved, as buyers are saying, in effect, “We see inflation long term.” For some time now, Oxbow has been saying that investing in long-term bonds is not recommended. We also have been saying if for some reason long-term rates decline, use that opportunity to sell those long-term bonds you own. In addition, we’re seeing big cracks in the lax lending credits in the subprime market. In late September Tricolor declared bankruptcy. This looks to be similar, as First Brands is now putting private credit in the crosshairs.

Where Does All This Leave the Average Investor?

From where we see it, the average investor is currently all in. Why not? They haven’t had to worry about much of anything for a number of years as the Federal Reserve has usually been there for a bailout. This time, however, may be different. We have cautioned investors, especially older investors, to balance their accounts. Notice Exhibit 5 showing the extreme ownership of equity holdings of people over the age of 55.

Ages between 55 and 80 are not a time to experience heavy drawdowns for most investors. Within this group, stock exposure is almost 80%. It wouldn’t hurt to have some liquidity as an insurance policy here.

What About Oxbow?

We still own companies that have the characteristics we look for. The three things we concentrate on are: (1) competitive advantage, (2) consistent cash flow and (3) a good balance sheet. Chance Finucane, Oxbow’s Chief Investment Officer, constantly emphasizes stock valuations that have long-term growth, plus give investors some cash equivalent as a buffer. We do the same thing in our high-income strategy. But as in 1999 we don’t chase the high-flyers, and we don’t get caught up in owning things that make no business sense.

At Oxbow we continue to hold the stocks that make good investment sense, always looking for undervalued situations. In addition, we own a considerable amount of short-term U.S. Treasuries. Looking back to 1999, high liquidity really paid off the next three years. Having liquidity gives the investor options.

As always, we wish you the best this fall and into 2026.

Ted Oakley

Bob Walsh

“Write it on your heart that every day is the best day in the year.”

–Ralph Waldo Emerson

“There ain’t no surer way to find out whether you like people or hate them than to travel with them.”

–Mark Twain

The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Any opinions, projections, or forward-looking statements expressed herein are solely those of the authors, may differ from the views or opinions expressed by other areas of the firm and are only for general informational purposes as of the date indicated. The material contained herein has been prepared from sources and data we believe to be reliable but we make no guarantee as to its accuracy or completeness. This material is not intended to be relied upon as specific legal or tax advice or investment recommendations for any individual as the information provided does not take into account the specific objectives, financial situation, or particular needs of any specific person. Investments involve risk and are not guaranteed.