Today's situation is very similar. Inflation-adjusted oil prices are near 1973 levels. The stock market has endured a six-month period of stagnation that doesn't seem to be getting better. And since late August, we've had an inverted yield curve. Of those three tidbits, it's the wacked-out yield curve that makes me most nervous.
Nobody really knows for sure.
Part of the explanation has to do with expectations of a Federal Reserve rate cut. Part of it comes from a lack of inflation. But what it really means is the bond market believes something is off-kilter in the economic and financial picture. The good news is that much of the damage has already been done. The Internet bubble has been burst, and all those greedy dot-com millionaires are investing in shoe leather as they look for jobs.