University of Michigan Archives - the patient investor %

May 25, 2026

Bipolar Disorder

Key Points

The University of Michigan Consumer Sentiment Index fell to a new record low since the series started in 1960.
The Dow Jones Industrial Average broke through resistance at 50,000, confirming a fresh bull market advance.

The University of Michigan Consumer Sentiment Index fell to a new low of 44.8.

University of Michigan: Consumer Sentiment

A plot of the 3-month moving average since 1960, when the Consumer Sentiment series started, shows that consumer sentiment is at a record low.

University of Michigan: Consumer Sentiment

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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.

August 16, 2025August 16, 2025

US Leading Indicators

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

Prof. Robert Shiller: CAPE 10 Data
S&P Global: S&P 500 Sales and Earnings Estimates
University of Michigan: Survey of Consumers
Federal Reserve of St Louis: FRED Data
Bureau for Economic Analysis: Motor Vehicles Data

Notes

See Managing Risk to learn more.
See Bull-Bear and Stock Valuation for more on our composite market indicators.

Colin Twiggs

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.

March 29, 2025March 29, 2025

US Weekly Market Snapshot

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

Bull/Bear Market

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

Bull-Bear Market Indicator

We replaced the Coincident Economic Activity Index with Current Economic Conditions from the University of Michigan’s monthly consumer survey. The UOM index offers earlier recession warnings—when the 3-month moving average crosses below 100—and more timely updates.

University of Michigan: Current Economic Conditions

The current reading of 68.20 is a strong bear signal. The Fed Funds target rate is also in a bear cycle, but the two require confirmation from one of the following two indicators:

If the Chicago Fed Financial National Conditions Index rises above -0.40.

Chicago Fed National Financial Conditions Index

Or the S&P 500 30-week Smoothed Momentum crosses below zero.

S&P 500

Stock Pricing

Stock pricing eased slightly to the 95.67th percentile from a high of 97.79 six weeks ago. However, the extreme reading still warns that stocks are at risk of a significant drawdown.

Stock Market Value Indicator

The Stock Pricing indicator compares stock prices to long-term sales, earnings, and economic output to gauge market risk. 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

There’s little change this week. We are close to a bear market, with the bull-bear indicator at 60%. Stock pricing is still extreme, highlighting the risk of a significant drawdown.

Acknowledgments

- Multpl.com: Shiller PE Ratio
- S&P Global: S&P 500 Sales and Earnings Estimates
- University of Michigan: Survey of Consumers
- Federal Reserve of St Louis: FRED Data

Colin Twiggs

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.

March 28, 2022

Consumer sentiment warns of recession

University of Michigan’s consumer sentiment index fell to 62.8 for February. Levels below 70 are normally associated with recession.

University of Michigan: Consumer Sentiment Index

Colin Twiggs

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.