Indicators · AI investment and markets
Technology stocks
Normal Downturn signal
The index closed 10.9% below its highest close of the past year on 6 Nov 2026.
The fall from the year's high is larger than 75% of the readings since 1990.
US recessions Periods when this signal was on
What it measures
The Nasdaq Composite index compared with its highest close of the past year.
Why it matters
A fall in AI and technology shares would probably be among the first signs that AI investment is declining. Falling share prices also lead the households that own them to spend less.
When it triggers
Triggers when the index closes 20% or more below its highest close of the past year.
Where it fits
A fall in technology shares and corporate credit. The argument predicts: Shares and corporate bonds most exposed to AI fall first, in a decline like the dot-com crash.
Other possible causes. Falls in share prices caused by rising interest rates (2022), and rises in borrowing costs unrelated to AI (2010–11).
A trigger can count as evidence for point 4 of our view, a stock market bust larger and faster than the dot-com crash.
The prediction
Open Set 8 Oct 2026
- If we are wrongtriggers, then stops
- Start−0.2%7 Oct 2026
- Now−10.9%6 Nov 2026
- If we are right−20.0% or belowby 31 Dec 2026
- Severe−60.0%in the model, if our view is right
If our view is right, this signal triggers by 31 Dec 2026: the Nasdaq's fall from its high of the past year reaches −20.0% or below. The date comes from the model, in which US share prices fall 30% by the end of 2026 and 60% by March 2027.
If it triggers and then stops being triggered for 21 consecutive trading days, that counts against our view, which expects a downturn to deepen for several years once it begins. The deadline refers to the period the data cover. If it passes without a reading of −20.0% or below, that counts somewhat against our view.
When the rule was set
The rule was set on 24 Sep 2026, when it was not triggered. Its threshold is in common published use. A 20% fall from the high of the past year is the common definition of a bear market.
How often it has been on
Applied to past data at the end of each month from Jan 1990, using only what had been published by then, it was on in 15% of months to 2019 and 16% since 2020. More than six months from any US recession as dated by the National Bureau of Economic Research, it triggered in Apr 2000 and Apr 2022. The rule was set with these years in view, so these figures cannot show how well it predicts.
Past triggers
On the data published at the time, it triggered in Aug 1990, Apr 2000, Mar 2008, Mar 2020 and Apr 2022.
Source: Nasdaq via FRED.