US Market Leading Indicators

Bull/Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, and the one on the right reflects stock market drawdown risk.

Bull/Bear Market

The Bull/Bear indicator remains at 60%, with two of five leading indicators signaling risk-off:

Bull-Bear Market Indicator

The Chicago Fed National Financial Conditions Index declined to -0.54, indicating that expanding liquidity supports financial markets. NFCI values above zero indicate restrictive financial conditions.

Chicago Fed National Financial Conditions Index

Stock Pricing

Stock pricing eased slightly to 97.32 percent, compared to a low of 95.04 percent in April and a high of 97.79 percent in February. The extreme reading warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

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

The S&P 500 Price-to-Sales ratio climbed to 3.12, higher than during the Dotcom bubble and way above the long-term average of 1.78. While partly attributable to wider profit margins, these tend to be cyclical and revert to the mean. Margins are also likely to come under pressure as companies are forced to absorb import tariffs if they cannot pass them on to consumers through higher prices.

S&P 500 Price-to-Sales

Conclusion

We are bordering on a bear market, with the bull-bear indicator at 60%, while extreme stock pricing increases the risk of a significant drawdown.

Acknowledgments

Notes

US Market Leading Indicators

Bull/Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, and the one on the right reflects stock market drawdown risk.

Bull/Bear Market

The Bull/Bear indicator remains at 60%, with two of five leading indicators signaling risk-off:

Bull-Bear Market Indicator

The Chicago Fed National Financial Conditions Index declined to -0.51, reflecting strong liquidity in financial markets. Values above zero indicate restrictive financial conditions.

Chicago Fed National Financial Conditions Index

Weekly continued claims are climbing, warning of a deteriorating labor market despite the low 4.1% unemployment rate.

Continued Claims & Unemployment Rate

Stock Pricing

Stock pricing eased slightly to 97.34 percent, compared to a low of 95.04 percent in April and a high of 97.79 percent in February. The extreme reading warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

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

Robert Shiller’s CAPE compares the current value of the S&P 500 index to inflation-adjusted earnings for the preceding 10 years. The multiple of 37.69 is similar to the last leg of the Dotcom bull market in 1999, warning that stocks are dangerously overpriced.

Robert Shiller's CAPE 10 Ratio

Conclusion

We are bordering on a bear market, with the bull-bear indicator at 60%. However, extreme stock pricing increases the risk of a significant drawdown.

Acknowledgments

Notes

US Market Leading Indicators

Bull/Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, and the one on the right reflects stock market drawdown risk.

Bull/Bear Market

The Bull/Bear indicator remains at 60%, with two of five leading indicators signaling risk-off:

Bull-Bear Market Indicator

The declining Fed Funds target rate indicates monetary easing, a bearish sign for the economy, while the University of Michigan survey of current economic conditions also warns of recession. However, the other two composite indicators are bullish: the Chicago Fed index of national financial conditions signals strong liquidity, and S&P 500 smoothed momentum remains positive.

In June, employment in cyclical industries—manufacturing, construction, transportation, and warehousing—grew by 10K.

Cyclical Employment Growth

Unemployment declined to 4.1%, but weekly continued claims are trending upward, warning that the labor market is deteriorating.

Continued Claims & Unemployment Rate

Also, aggregate hours worked declined in June, with year-on-year growth slowing to 0.8%. GDP growth is likely to follow.

Aggregate Hours Worked

Stock Pricing

Stock pricing increased to 97.44, compared to a low of 95.04 eleven weeks ago and a high of 97.79 percent in February. The extreme reading warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

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

The S&P 500 PE ratio is based on highest trailing earnings to eliminate distortions caused by sharp earnings falls during recessions. The current value of 28.5 is close to the 97th percentile of readings over the past fifty years.

S&P 500 PE of Highest Trailing Earnings

Conclusion

We are in the early stages of a bear market, with the bull-bear indicator at 60%. However, extreme stock pricing increases the risk of a significant drawdown.

Acknowledgments

Notes

US Market Leading Indicators

Bull/Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, while the right reflects stock market drawdown risk.

Bull/Bear Market

The Bull/Bear indicator remains at 60%, with two of five leading indicators signaling risk-off:

Bull-Bear Market Indicator

Weekly continued claims increased to 1.974 million on June 14, warning that the labor market is deteriorating. Unemployment was at 4.2% in May, but will likely rise in the next few months.

Continued Claims & Unemployment Rate

Stock Pricing

Stock pricing increased to 96.96, compared to a low of 95.04 ten weeks ago and a high of 97.79 percent in February. The extreme reading warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

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

Robert Shiller’s CAPE compares the S&P 500 index against a ten-year average of inflation-adjusted earnings. CAPE increased to 37.29, approaching its December 2021 high of 38.31, which was only previously surpassed during the Dotcom bubble of 1999-2000.

Robert Shiller's CAPE

The previous high was 32.56, before the stock market crash of October 1929, shown on Shiller’s long-term chart below.

Robert Shiller's CAPE

Conclusion

We are in the early stages of a bear market, with the bull-bear indicator at 60%. Extreme stock pricing increases the risk of a significant drawdown.

Acknowledgments

Notes

US Market Leading Indicators

Bull/Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, while the right reflects stock market drawdown risk.

Bull/Bear Market

Our Bull/Bear Market indicator remains at 60%, with two of five leading indicators signaling risk-off:

Bull-Bear Market Indicator

The unemployment rate remains at a low 4.2% in May, but weekly continued claims climbed to 1.945 million on June 7, warning that the labor market is deteriorating.

Continued Claims & Unemployment Rate

However, monetary conditions are easing. The Chicago Fed National Financial Conditions Index declined to -0.52 on June 13, signaling improved financial conditions.

Chicago Fed National Financial Conditions Index

Stock Pricing

Stock pricing eased slightly to 96.30, compared to a low of 95.04 nine weeks ago and a high of 97.79 percent in February. The extreme reading warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

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

Conclusion

We are in the early stages of a bear market, with the bull-bear indicator at 60%. Stock pricing is extreme, indicating risk of a significant drawdown.

Acknowledgments

Notes

US Market Leading Indicators

Bull/Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, while the right reflects stock market drawdown risk.

Bull/Bear Market

Our Bull/Bear Market indicator is at 60%, with two of five leading indicators signaling risk-off:

Bull-Bear Market Indicator

The University of Michigan index of current economic conditions improved to 67.6 in June, but remains deep in recession territory (below 100).

University of Michigan: Current Economic Conditions

Stock Pricing

Stock pricing eased slightly to 96.33, compared to a low of 95.04 eight weeks ago and a high of 97.79 percent in February. The extreme reading warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

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

 

Stock market capitalization declined to 2.60 times GDP in the first quarter of 2025. Warren Buffett’s favorite long-term valuation measure reflects an extreme reading compared to his fair value rule-of-thumb of 1.0 and a fifty-year average of 1.16.
Stock Market Capitalization to GDP

Conclusion

We are in the early stages of a bear market, with the bull-bear indicator at 60%. Stock pricing remains extreme, indicating risk of a significant drawdown.

Acknowledgments

Notes

US Market Leading Indicators

Bull/Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, while the right reflects stock market drawdown risk.

Bull/Bear Market

Our Bull/Bear Market indicator remains at 60%, with two of five leading indicators signaling risk-off:

Bull-Bear Market Indicator

Employment in cyclical sectors—manufacturing, construction, and transport and warehousing—remains strong at 27.8 million, with no sign of the typical contraction that precedes a recession.

Employment in Cyclical Sectors: Manufacturing, Construction, and Transport & Warehousing

However, the 12-month average of heavy-weight trucks declined to 39.0K units in May, just a smidgen from a 38.7K bear signal.

Heavy Truck Sales

Stock Pricing

Stock pricing increased to 96.70, compared to 95.04 seven weeks ago and a high of 97.79 percent in February. The extreme reading warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

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

Conclusion

We remain in the early stages of a bear market, with the bull-bear indicator at 60%. Stock pricing is extreme, indicating risk of a significant drawdown.

Acknowledgments

Notes

US Market Leading Indicators

Bull/Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, while the right reflects stock market drawdown risk.

Bull/Bear Market

Our Bull/Bear Market indicator remains at 60%, with two of five leading indicators signaling risk-off:

Bull-Bear Market Indicator

The National Financial Conditions Index from the Chicago Fed dipped to -0.606, signaling monetary easing.

Chicago Fed National Financial Conditions Index

However, outside of the 2022 COVID pandemic, the University of Michigan index of current economic conditions is at the lowest recorded level since its inception in 1960.

University of Michigan: Current Economic Conditions

Also, continued unemployment claims rose to 1.92 million on May 17, a 39% increase in the four-week moving average from its low in June 2022. However, the unemployment rate remains at 4.2% and does not warrant serious concern until it reaches 5.0%.

Continued Claims & Unemployment Rate

Stock Pricing

Stock pricing increased to 96.51, compared to 95.04 six weeks ago and a high of 97.79 percent in February. The extreme reading warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

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

Conclusion

We remain in the early stages of a bear market, with the bull-bear indicator at 60%. Stock pricing is extreme, with elevated risk of a significant drawdown.

Acknowledgments

Notes

US Market Leading Indicators

Bull/Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, while the right reflects stock market drawdown risk.

Bull/Bear Market

Our Bull/Bear Market indicator remained at 60% this week, with two of five leading indicators signaling risk-off:

Bull-Bear Market Indicator

30-Week Smoothed Momentum is approaching zero on the S&P 500. A cross to below zero would complete another composite bear signal.

S&P 500 Twiggs Smoothed Momentum 30-Week

Stock Pricing

Stock pricing eased to 96.05, compared to 95.04 five weeks ago and a high of 97.79 percent in February. The extreme reading warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

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

Conclusion

We remain in the early stages of a bear market, with the bull-bear indicator at 60%. Stock pricing is extreme, with elevated risk of a significant drawdown.

Acknowledgments

Notes

US Weekly Leading Indicators

Bull/Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, while the right reflects stock market drawdown risk.

Bull/Bear Market

Our Bull/Bear Market indicator remained at 60% this week, with two of the five leading indicators signaling risk-off:

Bull-Bear Market Indicator

The University of Michigan consumer survey of current economic conditions recorded the second lowest reading since its start in 1960. The lowest was in the aftermath of the pandemic, in June 2022.

University of Michigan: Current Economic Conditions

Stock Pricing

Stock pricing rallied to 96.59, compared to 95.04 four weeks ago and a high of 97.79 percent in February. The extreme reading warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

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

Conclusion

We remain in the early stages of a bear market, with the bull-bear indicator at 60%. Stock pricing is extreme, warning of the risk of a significant drawdown.

Acknowledgments