{"id":62517,"date":"2025-10-04T09:25:25","date_gmt":"2025-10-04T09:25:25","guid":{"rendered":"https:\/\/thepatientinvestor.com\/?p=62517"},"modified":"2025-10-04T12:35:07","modified_gmt":"2025-10-04T12:35:07","slug":"us-stock-pricing-reaches-a-new-extreme","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2025\/10\/04\/us-stock-pricing-reaches-a-new-extreme\/","title":{"rendered":"US Stock Pricing Reaches a New Extreme"},"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. Still, we would advise investors to be circumspect about adding new positions without carefully investigating 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

Updates to two of our labor market indicators (highlighted in orange) are delayed because of the US government shutdown.<\/p>\n

Stock Pricing<\/h2>\n

Stock pricing increased to a new high of 98.56 percent this week, compared to an 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

The Warren Buffett indicator compares stock market capitalization to GDP. Our preliminary calculation for the third quarter reached a new high of 3.06, compared to a peak of 1.89 during the Dotcom bubble.
\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