For the sake of comparison, the most relevant previous period would be the bursting of the internet bubble, which produced the very mild 2001 recession, she said, adding,“ We wouldn’ t have had a recession without the wealth effect from the dot-com bust.”

Sonders hasn’ t predicted either a recession or a bear market in 2026, but she reiterated how correlated consumer behavior and rising wealth levels have become.

Between April 2000 and October 2002, the equity market sustained an extended, multiyear decline of 47 % and the tech-heavy Nasdaq fell 78 %. The U. S. economy also suffered the September 11, 2001, terrorist attack, which resulted in more than one million lost jobs in two months, as well as major accounting scandals in 2001 and 2002( related to the collapses of WorldCom and Enron) that undermined investor confidence.

Yet statistically, the downturn was remarkably benign, and less severe than any other recession in the last 40 years. During that entire 30-month period, unemployment rose to only 6 %( from 4 %).

Sonders hasn’ t predicted either a recession or a bear market in 2026, but she reiterated how correlated consumer behavior and rising wealth levels have become.“ What happens if we start to see a corrective stock market phase that goes beyond what we’ ve seen so far?” she asked.

So far, most of the serious cracks in the consumer economy are surfacing among lower- and middle-income Americans, she said. Traditional savings, which boomed during the pandemic, are now slightly below average. Many, like economist Ed Yardeni, believe consumption is being buoyed by affluent baby boomers spending retirement savings that have appreciated dramatically with soaring financial markets.

There are several major differences between the turbulence of the mid-2020s market and that of the late 1990s and early 2000s.

Equities have held up much better so far than they did in the 2000-2002 period, but many individual stocks have experienced far

greater declines than the indexes have. In the first four month of 2026, the biggest decline in the S & P 500 from peak to trough has been 9 %, Sonders said. But the average member of that index has fallen 19 % at some point in 2026.

The story gets worse when one looks at the Nasdaq, which entered a correction with a 13 % decline several weeks ago before bouncing back, she said. The average individual component of the tech-heavy Nasdaq fell 34 % before bottoming in early April and some former high-flying“ software as a service”( SAAS) companies have fared even worse.

“ It just hasn’ t happened all at once,” Sonders said.“ That’ s not a bad thing” but it is“ suggestive of short-termism, momentum [ thinking ] and rotation trading.”

The boom in capex spending for artificial intelligence is also something different from the dot-com era. Today, most of the hyperscalers like Amazon, Microsoft, Alphabet and Oracle are already seeing demand for AI services that exceeds supply, whereas during the late 1990s, the mindset of companies was more anticipatory: Those laying all the fiber-optic networks said“ build it and they will come.”

The longer the war in Iran goes on, the more likely the risk of a global recession becomes“ even if we don’ t get to $ 200 a barrel oil,” Sonders said.

The notion that this war doesn’ t matter to the U. S. economy reflects a“ narrow-minded viewpoint,” she said. A number of commentators and stock market participants could be underestimating the“ ripple effects” of the conflict, which are already showing up in everything from diesel and fertilizer prices to the cost of helium, which is used to make semiconductors.

It probably won’ t be“ much longer before we see problems,” Sonders said. Contrary to popular opinion, America is a net oil importer though it’ s a net energy exporter thanks to natural gas, so the impact on the nation’ s supply chain is more nuanced than some optimists believe.

She also expressed skepticism about certain other narratives that have gained credence: While the round of tariffs that were initiated last year haven’ t produced 1970s-style inflation, she maintained“ you really have to twist yourself into a pretzel to prove it isn’ t” creating any inflation.

— Evan Simonoff

10 | FINANCIAL ADVISOR MAGAZINE | MAY / JUNE 2026 WWW. FA-MAG. COM