{"id":62469,"date":"2025-09-20T05:30:06","date_gmt":"2025-09-20T05:30:06","guid":{"rendered":"https:\/\/thepatientinvestor.com\/?p=62469"},"modified":"2025-09-20T06:03:20","modified_gmt":"2025-09-20T06:03:20","slug":"us-stock-valuations-even-higher","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2025\/09\/20\/us-stock-valuations-even-higher\/","title":{"rendered":"US Stock Valuations Reach a New High"},"content":{"rendered":"
\n
\"Bull\/Bear<\/div>\n
\"Stock<\/div>\n<\/div>\n

The gauge on the left indicates bull or bear market status, and the one on the right reflects stock market valuation levels. Stock market pricing indicates whether stocks are cheap or expensive relative to earnings, but it is a poor indicator of market timing<\/strong>. We do not recommend selling stocks because the market valuation is high, but we would advise investors to be circumspect about adding new positions without careful investigation of the underlying value.<\/p>\n

Bull\/Bear Market<\/h2>\n

The Bull\/Bear indicator remains at 40%, warning of a bear market ahead.<\/p>\n

\"Bull-Bear<\/p>\n

The Fed resumed rate cuts, with the fed funds target rate now 4.0% to 4.25%, and a mid-point of 4.125%. The downward cycle warns of a bear market.<\/p>\n

\"Fed<\/p>\n

However, the Chicago Fed National Financial Conditions Index declined to -0.558, indicating loose monetary conditions that will likely support stock prices.<\/p>\n

\"Chicago<\/p>\n

Stock Pricing<\/h2>\n

Stock pricing increased to a new high of 98.32 percent, compared to the April low of 95.04 percent. The extreme reading warns that stocks are at long-term risk of a significant drawdown.<\/p>\n

\"Stock<\/p>\n

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.<\/p>\n

Warren Buffett’s favorite stock market valuation indicator, market capitalization climbed to a new all-time high of 2.84 times GDP in the second quarter, more than double the long-term average (since 1974) of 1.175.<\/p>\n

\"Stock<\/p>\n

Conclusion<\/h2>\n

The bull-bear indicator at 40% warns of a bear market ahead, while extreme pricing increases the long-term risk of a significant drawdown.<\/p>\n

Acknowledgments<\/h4>\n