The oil price shock due to the Israel/USA Iran war led to my empirical research of the 1973 oil price shock which is widely considered t the first of many. My forte is to extreme events and to find cause and then utilize findings to predict next similar event.
Investors were caught off guard by the 1973 shock. The Dow Jones Composite Index was higher on 11/1/73 than it was on 10/6/73, which is when the Israel Arab Yom Kippur war began. The war, which ended on 10/25/73, included OPEC placing an embargo for oil sold to the US on 10/19/73. The embargo was the catalyst that caused the price shock. By the time the embargo was lifted on 03/18/74, the Dow had declined by 13% from its Q4 of 1973 November high.
The Dow continued to decline and in January 1975, the venerable index had declined by 45.3% from its 1973 high. The decline was among the three most brutal declines for the Dow Jones Composite from 1929 to 2009.
Most investors did not see the risk and instead bought the dip because:
1. The war had a short duration
2. Embargo also had a short duration
3. Price for oil peaked in January 1974 and had begun a gradual and steady decline.
Based on the brutality of the Dow’s decline practically no one discounted the insidious nature of inflation. Approximately 15% of crude oil consumed on an annual basis is used to manufacture consumer staples and durables. The price declines at the pump indicated that the coast was clear. However, the increase in the price of oil by 126% from 1973 to 1974 was the signal that significant increases for the Consumer Price Index were inevitable. From October of 1973 to January of 1974 the increase for CPI was 2.2%. The nominal increase reinforced analysts and pundits to proclaim bullishness. What was not discounted was the fact the oil price shocks instantly impact gasoline and fertilizer. The impact on consumer products and on the price of the food that is nurtured by fertilizer is delayed.
Oil price shocks create insidious inflation. A good example is the drug store. The store does not increase the price of the goods on the shelves which were produced from petroleum until the manufacturer of the products raises their wholesale prices. Thus, prices not increasing at the retail level in the early months after the 1973/74 oil price shock only reinforced that all was well for the consumer and the economy. From when the embargo was lifted to August of 1974, the CPI had increased by another 4.6%. From October of 1973, to August 1974, the increase was 8.8%. The price increases were too much and too fast for the consumer. A reduction in demand by consumers and profit margin destruction for manufacturers resulted in extreme volatility for the US economy.
The US economy’s GDP began a precipitous decline and into a recession that arguably ranks as the most severe since the US Great Depression. For 1974, US GDP declined for four consecutive quarters.
What exacerbated the 1974 Recession and Dow collapse was the price of oil remaining near its high. The result was that prices of consumer goods relatively remained high while the profit margins for the manufacturers remained lower.
My prediction is that 2026/2027 for the global markets and economy will be a carbon copy of 1973/1974. Its because both periods share a common denominator and its reduced supply of oil:
- US and other countries created strategic oil and petroleum storage initiatives in 1975. The plan was to have plenty of supply that could be used to mitigate future oil price shocks.
- Iran/Israel/US 2026 war has resulted in significant damage to the oil producing capacity of the Middle East. It will take years and billions for the capacity to get back 2025 level.
In addition to the significant risk for the markets my Alpha Centuri algorithm which was developed from by empirical research of the CPI’s impact on the S&P 500 since 1871. The algorithm is presently in cash. The chart below depicts the performance of $100 invested in Alpha Centuri versus the S&P 500 from 1871 to 2025.
My recommendation is for all US and global investors to sell their blue chip stocks and to deploy a defensive growth strategy. The table below contains the asset classes for which the proceeds for the sales of blue chips be allocated:
I am also predicting that a secular bear market has already or will soon begin. Based on prior secular bears since 1802, I am predicting that blue chips will produce a negative real return for the next eight to 20 years.
The videos below are clips from the weekly sessions I hold. The February 28, 2026 video provides some color on secular markets and my defensive growth strategy. The video includes Stanley Druckenmiller’s video that covers is rationale for why there will be a crash in 2026 and his defensive strategy. Mr. Druckenmiller has been a leading hedge fund manager throughout most of my 50 year career. He also mentored both Scott Bessent, US. Treasury Secratory and Kevin Warsh who will become the next Chairman of the Federal Reserve Bank.
MOTM Mar 21 2026
MOTM Feb 28 2026
MOTM Jan 17 2026
Michael Markowski, Director of Research for DynastyWealth.com and SaveChangeWorld.com. Developer of “Defensive Growth Strategy”. Entered markets with Merrill Lynch in 1977. Named “Top 50 Investor” by Fortune Magazine. Formerly, underwriter of venture stage IPOs, including one acquired by United Health Care for 1700% gain. Since 2002 has conducted empirical research to develop algorithms which predict the negative and positive extremes for the market and stocks. Has verifiable track records for predicting (1) bankruptcies of blue chips, (2) market crashes and (3) stocks multiplying by 10X. In a 2007 Equities Magazine article predicted the epic collapses for Lehman, Bear Stearns and Merrill Lynch. Most recent algorithm developed from research of UBER and AirBnB has enabled identification of startups having 100X upside potential within 7 to 10 years. Video (3 minutes, 53 seconds) covers Mr. Markowski's research to develop predictive algorithm methodology.