Author: Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He founded PVT Capital (AFSL number 546090), which provides income and growth strategies to wholesale clients. Colin also co-founded Incredible Charts and writes the popular Patient Investor newsletter. Using a top-down approach, Colin identifies macro trends in the global economy and then combines fundamental and technical analysis to evaluate opportunities in sectors that stand to benefit. Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
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US Market Snapshot

Bull-Bear Market Index
Stock Market Pricing Indicator

The gauge on the left indicates whether the market is in a bull or bear phase, and the indicator on the right reflects the current valuation of the stock market. Stock market pricing indicates whether stocks are cheap or expensive in relation to earnings, but it is a poor indicator of market timing. We do not recommend selling stocks because market valuations are high; however, we recommend exercising caution when adding new positions.

Bull/Bear Market

We revised the bull-bear market leading indicator to improve its responsiveness, reducing it to a composite of five key indicators. Currently, two of the five indicators signal risk-off, indicating a medium risk of a US bear market.

Bull/Bear Market Indicator

Freight Transport Activity

The Cass Freight Shipments Index 12-month moving average remains in a downtrend, signaling risk-off. The index highlights broad freight shipping levels in the mainstream economy, and a rise or fall of more than 3 basis points signals risk-on or risk-off, respectively.

Cass Freight Shipments Index

Stock Pricing

US stock pricing remains at extreme levels. We changed the composition of the Forward PE and Price-to-Sales indicators at the end of April 2026, so earlier highs are not directly comparable.

US Stock Market Value Indicator

We use z-scores to measure each indicator's current position relative to its historical data, with results expressed in standard deviations from the mean. We then average the five readings and convert that to a percentile. The higher the stock market price measure is relative to the historical mean, the greater the risk of a sharp drawdown.

Buffett Indicator

Warren Buffett's favorite long-term measure of stock market valuation provides a stable valuation ratio largely unaffected by fluctuating profit margins.

The ratio of stock market capitalization to GDP is more than double its long-term average of 1.2. Buffett considers values above 2.0 to indicate that stock prices are dangerously high.

Buffett Indicator: Stock Market Capitalization to GDP

Dow Jones Industrials Price-to-Sales

We use a 20% trimmed mean of the Price-to-Sales ratio across the 30 stocks in the Dow to remove the most extreme readings that would otherwise distort the ratio.

A change in the Dow Jones index composition on June 29, 2026 may have contributed to the recent jump, when Alphabet Inc. (GOOGL) replaced Verizon (VZ) in the index.

Dow Jones Industrials Price-to-Sales Ratio

Shiller CAPE

Robert Shiller's CAPE smoothes out business-cycle effects by comparing the S&P 500 index to a 10-year average of inflation-adjusted earnings.

The current advance on the CAPE ratio is the second-highest in history, behind only the 1999 peak during the Dotcom bubble at 44.2, with values far above their long-term average of 22.4.

Robert Shiller's S&P 500 CAPE Index

Conclusion

The Bull-Bear indicator suggests the US economy is slowing, but is not yet in a recession.

Extreme pricing, however, elevates the risk of a significant drawdown.

Acknowledgments

Managing Risk

To find out more, go to Managing Risk on the top menu, or see:

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ASX Market Snapshot

Bull-Bear Market Leading Index
Stock Market Pricing Indicator

The gauge on the left indicates whether the market is in a bull or bear phase, while the one on the right reflects the current valuation of the stock market. Stock market pricing indicates whether stocks are cheap or expensive in relation to earnings, but it is a poor indicator of market timing. We do not recommend selling stocks when market valuations are high, but we advise caution when adding new positions.

Bull/Bear Market

The ASX Bull-Bear Leading Index signals a mild bear market.

ASX Bull/Bear Market Indicator

Australian leading indicators have a 40% weighting in the ASX Leading Index, China 20%, and the US Leading Index carries the remaining 40%.

Financial Sector

The ASX 200 Financials Index (XFJ) is below its 50-week weighted moving average, and a breach of primary support at 9000 would signal risk-off.

ASX 200 Financials Index

NAB Forward Orders

NAB Forward Orders improved to zero 2026, but the 3-month moving average remains below zero, signaling risk-off.

NAB Forward Orders

Stock Pricing

ASX stock pricing fell to 74.78% from 80.78% three weeks ago. Stocks are overvalued, and the decline is a bear signal.

ASX Stock Market Value Indicator

We use z-scores to measure each indicator's current position relative to its historical data, with results expressed in standard deviations from the mean. We then calculate an average of the five readings and convert that to a percentile. The higher stock market prices are relative to their historical mean, the greater the risk of a sharp drawdown.

Conclusion

The Bull-Bear indicator suggests that the Australian economy is slowing. Two more indicators have fallen sharply. While they do not yet signal risk-off, we are on bear alert.

On the other hand, valuations remain high, increasing the risk of a drawdown.

Acknowledgments

Managing Risk

To find out more, go to Managing Risk on the top menu, or see:

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Xi Has Trump Over a Barrel

Key Points

  • Producer prices jumped by 6.0% over the 12 months to April, warning of higher consumer prices ahead.
  • 10-year Treasury yields responded with a rise to 4.48%.
  • Xi Jinping has the upper hand in negotiations with Donald Trump because of China’s large strategic oil reserves, which they could use to keep prices in check.
  • The S&P 500 reached a new high at 7444, while the Dow is consolidating in a bullish narrow range below 50,000.
  • The Main Street US economy is under the pump, but Semiconductors, Construction, and Heavy Electrical industries are booming due to datacenter spending.
  • Lithium, Copper, and Critical Materials show signs of buying pressure, but Uranium is lagging.

Producer prices jumped by 6.0% for the 12 months to April 2026, driven by rising fuel prices and transportation costs. The cost of rising fuel prices is spreading through the economy, with the core index (excluding food and energy) leaping to 5.2%. The chart below shows the impact of energy shortages on producer prices after Russia’s full-scale invasion of Ukraine in 2022. We expect the impact of the Strait of Hormuz closure to be more severe.

Producer Price Index (PPI)

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CPI Jump to 3.8% Spooks Bond Market

Key Points

  • Headline CPI jumped to 3.8% in April in response to rising energy prices.
  • We expect Food CPI to jump sharply as rising costs pass through the supply chain over the next few months.
  • 10-year Treasury yields jumped to 4.46%, a bearish sign for stocks, but the Dow continues to test resistance at 50,000.
  • The silver breakout above $80 per ounce continues.
  • Surplus Gold and silver inventories in the US have been depleted, which will likely increase upward pressure on prices when the Persian Gulf crisis is resolved.

The headline Consumer Price Index (CPI) jumped to 3.8% for the 12 months to April 2026, up from 3.3% in March. Core CPI (excluding food and energy) increased more gradually to 2.7% in April, up from 2.6% in the previous month.

CPI & Core CPI - Annual

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Silver and Lithium Shine

Key Points

  • Silver broke through resistance at $80 per ounce, signaling a fresh advance.
  • Gold remains rangebound.
  • Oil & Gas stocks are weak, while crack spreads are widening.
  • Copper, Uranium, and Critical Materials show signs of buying pressure, following the Lithium breakout.
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S&P 500 Rallies on Job Gains, But Peace Deal Hopes Crash

Key Points

  • President Trump rejects Iran’s peace proposal.
  • Iran continued attacks on its Gulf neighbors.
  • Brent crude July futures jump to $104.50 per barrel.
  • Confidential intelligence sources say that Iran can survive a US blockade for at least 3-4 months.
  • The US labor market added 115,000 jobs in April 2026, while unemployment held steady at 4.3%.
  • The S&P 500 reached a new high, while the Dow Jones Industrial Average threatens a breakout.

DUBAI/WASHINGTON, May 10 (Reuters) – President Donald Trump on Sunday rejected Iran’s response to a US proposal for peace talks, dashing hopes for an imminent end to the 10-week-old conflict….

“I don’t like it — TOTALLY UNACCEPTABLE,” Trump wrote on Truth Social, without giving further detail. Oil prices rose $3 a barrel after the United States and Iran failed to reach agreement.

Iran’s proposal includes a demand for compensation for war damages and an ​emphasis on Iranian sovereignty over the strait, state media said. It also calls on the US to end its naval blockade, guarantee no further attacks, lift sanctions and end a US ban on Iranian oil ​sales, the semi-official Tasnim news agency said.

Brent Crude July’26 (Nymex) futures jumped to $104.50 per barrel while December’26 futures (orange) rallied to $89.25 per barrel. December prices reflect the oil market’s longer-term assessment of crude shortages. Damage to existing production and shipping facilities will take time to repair, even if the Strait of Hormuz is reopened.

Brent Crude Nymex Futures (July'26 & Dec'26)

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US Market Snapshot

Bull/Bear Market Index
Stock Market Pricing Indicator

The gauge on the left indicates whether the market is in a bull or bear phase, and the indicator on the right reflects the current valuation of the stock market. Stock market pricing indicates whether stocks are cheap or expensive in relation to earnings, but it is a poor indicator of market timing. We do not recommend selling stocks because market valuations are high; however, we recommend exercising caution when adding new positions.

Bull/Bear Market

The yield curve bear signal has now lapsed, and we have taken the opportunity to revise the bull-bear market leading indicator to improve its responsiveness. The Bull-Bear Leading Index is now stripped down to a composite of five separate indicators, which collectively signal a mild bear market:

Bull/Bear Market Indicator

Employment in Cyclical Sectors

Employment in cyclical sectors — Manufacturing, Construction, and Transportation & Warehousing — typically accounts for the majority of job losses during a recession. Rises or falls in employment across these sectors are a leading indicator of the economy. A decline of more than 300K would signal risk-off, while a rise of 500K from the last trough would signal risk-on. Employment declined by 264K from its preceding peak of 27.671 million in September 2024, reaching 27.407 million in December 2025, but has since recovered to 27.501 million.

Employment in Cyclical Sectors

Stock Pricing

US stock pricing increased to 95.96% from 95.09% last week, compared to a recent low of 91.79% five weeks ago.

US Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its historical data, with results expressed in standard deviations from the mean. We then calculate an average of the five readings and convert that to a percentile. The higher the stock market price measure is relative to the historical mean, the greater the risk of a sharp drawdown.

Buffett Indicator

Warren Buffett’s favorite long-term measure of stock market valuation compares stock market capitalization to GDP, providing a stable, long-term ratio unaffected by fluctuating profit margins. The ratio reached a new high of 3.16 this week, more than double its long-term average of 1.2.

Buffett Indicator: Stock Market Capitalization to GDP

Dow Jones Industrials Price-to-Sales

The Price-to-Sales ratio for the Dow Jones Industrial Average has reached a new high of 4.09. We use a 20% trimmed mean of the Price-to-Sales ratio for the 30 stocks in the Dow to remove the most extreme readings that would otherwise distort the ratio.

Dow Jones Industrials Price-to-Sales Ratio

Conclusion

The bull-bear indicator at 60% suggests the US economy is slowing, but is not yet in a recession. Extreme pricing, however, elevates the risk of a significant drawdown.

Acknowledgments

Managing Risk

To find out more, go to Managing Risk on the top menu, or see:

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ASX Market Snapshot

Bull/Bear Market Leading Index
Stock Market Pricing Indicator

The gauge on the left indicates whether the market is in a bull or bear phase, while the one on the right reflects the current valuation of the stock market. Stock market pricing indicates whether stocks are cheap or expensive in relation to earnings, but it is a poor indicator of market timing. We do not recommend selling stocks when market valuations are high, but we advise caution when adding new positions.

Bull/Bear Market

The ASX Bull-Bear Leading Index signals a mild bear market.

ASX Bull/Bear Market Indicator

Australian leading indicators have a 40% weighting in the ASX Leading Index, China 20%, and the US Leading Index carries the remaining 40%.

Financial Sector

The ASX 200 Financials Index (XFJ) is below its 50-week weighted moving average, and a breach of primary support at 9000 would signal risk-off.

ASX 200 Financials Index

China

The OECD Composite Leading Indicator for China eased to 98.10 in August. Values below 99.0 or a fall of more than 3 points from the preceding peak, as in 2008, signal risk-off.

China: OECD Composite Leading Indicator

China is Australia's largest export market, and the Chinese economy's performance directly affects the ASX.

Stock Pricing

ASX stock pricing jumped to 76.72 percent, from 73.92 percent last week. The highest reading was 92.23 percent in August 2025, compared with a low of 67.85 percent in April 2025.

ASX Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its historical data, with results expressed in standard deviations from the mean. We then calculate an average of the five readings and convert that to a percentile. The higher stock market prices are relative to their historical mean, the greater the risk of a sharp drawdown.

Conclusion

The ASX bull-bear indicator at 64% signals a mild bull market, while stock market pricing remains high, increasing the risk of a drawdown.

Acknowledgments

Managing Risk

To find out more, go to Managing Risk on the top menu, or see:

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Trump Talks “Peace Deal” But Nothing Stops This Train

Key Points

  • President Trump again baits financial markets with the prospect of a peace agreement.
  • Brent Crude (July’26 futures) is testing support at $100 per barrel.
  • However, the crude market faces critical shortages even if a peace deal is signed.
  • The S&P 500 rallied to a new high at 7365, while the Dow threatens a breakout above 50,000.
  • The ISM Services PMI warns that growth is slowing, while soaring prices signal inflationary pressures.
  • Lithium is in a strong uptrend, while Copper, Critical Materials, and Uranium show signs of a recovery.
  • The RBA hiked rates this week and would like to hold for a while, but rising prices may force further hikes.

ISLAMABAD/WASHINGTON/TEL AVIV, May 7 (Reuters) – U.S. President Donald Trump predicted a swift end to the ​war with Iran as Tehran considered a U.S. peace proposal that sources said would formally end the conflict while leaving unresolved key U.S. demands that Iran suspend ‌its nuclear program and reopen the Strait of Hormuz.

An Iranian foreign ministry spokesperson cited by Iran’s ISNA news agency said Tehran would convey its response, while Iranian lawmaker Ebrahim Rezaei, a spokesperson for parliament’s powerful foreign policy and national security committee, described the proposal as “more of an American wish-list than a reality.”

“They want to make a deal. We’ve had very good talks over the last 24 hours, and it’s very possible that we’ll make ​a deal,” Trump told reporters in the Oval Office on Wednesday, saying later “it’ll be over quickly.”

Trump has repeatedly played up the prospect of an agreement to end the war ​that started on February 28, so far without success. The two sides remain at odds over a variety of difficult issues, such as Iran’s nuclear ⁠ambitions and its control of the Strait of Hormuz, which before the war handled one-fifth of the world’s oil and gas supply.

A Pakistani source and another source briefed on the mediation ​said an agreement was close on a one-page memorandum that would formally end the conflict. That would kick off discussions to unblock shipping through the strait, lift U.S. sanctions on Iran and set ​curbs on Iran’s nuclear program, the sources said.

A separate senior Pakistani official involved in the talks told Reuters on Thursday that negotiators were hopeful of reaching a deal but noted gaps between the sides remained.

Brent Crude (July futures), buoyed by optimism over a prospective peace deal, is retracing to test support at $100 per barrel.

Brent Crude Futures (ICE July'26)

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S&P 500 Uptrend Against Gold

Key Points

  • The S&P 500 index made a new high at 7230, reversing its long-term downtrend against Gold.
  • However, the Dow is struggling to break resistance at 50,000.
  • The ISM Manufacturing PMI indicates the sector is expanding, but producer prices are soaring.
  • Lithium is in a strong uptrend, while Copper remains rangebound.
  • Japanese intervention to support the Yen underlines the long-term reason for buying Gold.
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