Tag: Stock Market Pricing Indicator

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US 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 40%, warning of a bear market ahead.

Bull-Bear Market Indicator

The Chicago Fed National Financial Conditions Index declined to -0.555, indicating easy monetary conditions are supporting stocks and bonds.

Chicago Fed National Financial Conditions Index

Continued unemployment claims increased to 1.972 million on August 9, but the unemployment rate held steady at 4.2% in July. Fed Chair Powell highlighted the changing labor market dynamics in his Jackson Hole address on Friday. Job gains may decline due to falling immigration, but rising unemployment claims indicate a slowing economy. A rising unemployment rate for August would confirm a weakening labor market and open the door to a Fed rate cut in September.

Continued Unemployment Claims & Unemployment Rate

Stock Pricing

Stock pricing increased to a new high of 97.98 percent, compared to a low of 95.04 percent in April. 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 edged higher to 38.7, the highest ever recorded outside of the Dotcom bubble. CAPE compares the current S&P 500 index to a ten-year average of inflation-adjusted earnings.

Robert Shiller's CAPE

The S&P 500 price-to-sales ratio of 3.08 is the highest since our data began in 2000, and more than 70% above our long-term average of 1.78.

S&P 500 Price-to-Sales

Conclusion

The bull-bear indicator at 40% warns of a bear market ahead, while extreme pricing increases the risk of a significant drawdown.

Acknowledgments

Notes

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US 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 40%, warning of a bear market ahead.

Bull-Bear Market Indicator

The Chicago Fed National Financial Conditions Index declined to -0.54, indicating easy monetary conditions are supporting stocks and bonds.

Chicago Fed National Financial Conditions Index

However, the University of Michigan consumer survey of current economic conditions declined to a low of 60.9 in August, continuing a downtrend since mid-2024. Values below 100 indicate a bear market.

University of Michigan: Current Economic Conditions

Stock Pricing

Stock pricing climbed to a new high of 97.94 percent, compared to a low of 95.04 percent in April and an earlier 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 S&P 500 index to a ten-year average of inflation-adjusted earnings. Outside the Dotcom bubble, the current CAPE value of 38.59 is the highest ever recorded in over a hundred years.

Robert Shiller's CAPE

The forward price-earnings ratio for the S&P 500 increased to 24.9, more than a 50% premium compared to the long-term average of 16.1.

S&P 500 Forward PE

Conclusion

The bull-bear indicator at 40% warns of a bear market, while extreme pricing increases the risk of a significant drawdown.

Acknowledgments

Notes

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US Leading Indicator slips to 40%

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 declined to 40% from 60% last week, with heavy truck sales moving to risk-off:

Bull-Bear Market Indicator

Heavy truck sales declined to 37.1K units in July, with the 12-month moving average falling to 38.6K. Heavy truck sales are a reliable indicator of transport activity and business confidence. A decline of the 12-month MA by more than 10% from its October 2023 peak at 43K signals risk-off.

Heavy Truck Sales (Units)

Stock Pricing

Stock pricing climbed to a new high of 97.81 percent, compared to a low of 95.04 percent in April and an earlier 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 forward price-earnings ratio for the S&P 500 is close to the highest level in the last century, apart from the Dotcom bubble in 2000. The current reading of 24.5 is more than a 50% premium to the long-term average of 16.1 (since September 1974).

S&P 500 Forward PE

The S&P 500 PE is 28.6 times the highest trailing earnings, compared to 33.8 during the Dotcom bubble and a long-term average of 17.3 (since 1974).

S&P 500 PE of Highest Trailing Earnings

Conclusion

The composite leading indicator signals a bear market, while extreme pricing highlights the risk of a significant drawdown.

Acknowledgments

Notes

Posted on

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

Financial market liquidity is climbing, with the Chicago Fed National Financial Conditions Index declining to -0.57, indicating easy monetary conditions.

Chicago Fed National Financial Conditions Index

However, declining manufacturing jobs have caused a 50K decline in cyclical sector employment since June. The decline is less than the 300K needed for the cyclical jobs indicator to signal risk-off, but unsettled stock investors, with both the Dow and S&P 500 indicating a correction.

Cyclical Employment

Stock Pricing

Stock pricing climbed to 97.57 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.

Estimated stock market capitalization at the end of June soared to a new high compared to GDP for the past year. At 2.85, Warren Buffett’s favorite long-term indicator of market value is more than double its 1.17 long-term average and more than 50% higher than the 2000 high of 1.89 during the Dotcom bubble.

Stock Market Capitalization/GDP

Conclusion

Stocks are bordering on a bear market, while extreme stock pricing raises the risk of a significant drawdown.

Acknowledgments

Notes

Posted on

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 -0.55, with expanding liquidity supporting financial markets.

Chicago Fed National Financial Conditions Index

Stock Pricing

Stock pricing climbed to 97.50 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 Shiller CAPE ratio compares the current S&P 500 index value to 10 years of inflation-adjusted earnings. The CAPE ratio of 38.33 is the highest outside of the Dotcom bubble in 2000.

S&P 500 Shiller CAPE

The forward price-earnings ratio is also at an extreme reading of 24.5, compared to the fifty-year average of 16.3.

S&P 500 Forward Price-Earnings Ratio

Conclusion

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

Acknowledgments

Notes

Posted on

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

Posted on

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

Posted on

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

Posted on

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

Posted on

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

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