Futures Now

Market looks a lot like 1998: Wells Fargo

The market looks a lot like 1998: Wells Fargo
The market looks a lot like 1998: Wells Fargo

The recent spurt in volatility has many market participants drawing comparisons to prior crashes. Now, one former bear claims the market is giving her déjà vu to the late 1990s, and that could mean higher stock prices ahead.

"In terms of the late '90s, there are certainly some echoes and interesting comparisons that we're following," Wells Fargo's institutional equity strategist, Gina Martin Adams, told CNBC's "Futures Now" on Tuesday.

In 1998 the S&P 500 fell more than 15 percent from July to October before resuming its advance and finishing the year with more than 20 percent returns. "We cannot help but note the similarities to the 1998 emerging market financial crisis, and note that it took Fed action to calm the market then," said Martin Adams. A highly anticipated Fed meeting kicks off next week as investors anxiously wait to see if Janet Yellen will hike interest rates.

For Martin Adams, when it comes to the market, the two most important similarities between the current environment and 1998 are the swift decline in crude oil coupled with a sharp rise in the , and the common sector leaders.

"Right before the 1998 crisis in stocks and the broader financial market, we did have a 60 percent decline in oil prices and a roughly 30 percent rise in the dollar. That's about where we are now." In the last 12 months WTI crude oil prices have fallen more than 50 percent while the U.S. dollar index has risen 14 percent in the same period.

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"It's no wonder why the S&P 500 is going through a pretty significant correction in response to the massive destruction in the currency and commodity markets," she continued. "This is a commodity led crisis."

A trader (left) and a specialist on the floor of the New York Stock Exchange on a day when the Dow Jones industrial average fell 222 points, in January 1998.
Henny Ray Abrams | AFP | Getty Images

Martin Adams also noted the similarities in certain sector performance between now and 1998.

"In the 1998 experience, the energy sector was the leading indicator of weakness for the broader market and right before the market peaked sectors like and consumer discretionary were strong leaders."

Those three patterns hold true in 2015, as the energy space has fallen 19 percent on the year, making it the worst performer, while the health-care and consumer discretionary sectors are the only two still positive, up a respective 4 and 2 percent.

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It's those sectors that Martin Adams believes will eventually lead the market higher. "In the 1990s the sectors that lead out of the market correction were the same sectors that showed leadership into the market correction," she said. This time around, Martin Adams believes health care and consumer discretionary will again lead stocks higher. "We're sticking with the winners and not rotating into some of the more beaten-down names just yet."

Martin Adams, who was once dubbed the "biggest bear" on Wall Street before changing her tune last September, has a target on the S&P 500 of 2,200 over the next 12 months.