{"id":62993,"date":"2025-11-01T05:20:54","date_gmt":"2025-11-01T05:20:54","guid":{"rendered":"https:\/\/thepatientinvestor.com\/?p=62993"},"modified":"2025-11-01T05:20:54","modified_gmt":"2025-11-01T05:20:54","slug":"us-stock-pricing-at-new-high-2","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2025\/11\/01\/us-stock-pricing-at-new-high-2\/","title":{"rendered":"US Stock Pricing at 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. Still, we would advise investors to be circumspect about adding new positions without carefully investigating the underlying value.<\/p>\n

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

The Bull\/Bear indicator remains at 40%, warning of a bear market ahead. Updates to three market indicators (highlighted in orange below) are delayed because of the US government shutdown.<\/p>\n

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

The Philadelphia Fed Coincident Economic Activity Index deserves mention in the absence of updates for some of our regular indicators. A decline below 2.5% typically only occurs several months ahead of a recession.<\/p>\n

\"Coincident
\nThe Chicago Fed National Financial Conditions Index continues to signal loose monetary conditions, supporting high stock prices.<\/p>\n

\"Chicago<\/p>\n

However, a decline in bank reserves below $3.0 trillion warns that repo markets are tightening.<\/p>\n

\"Commercial<\/p>\n

And Bitcoin continues to test support at 110K, warning of tighter liquidity.<\/p>\n

\"Bitcoin<\/p>\n

Stock Pricing<\/h2>\n

Stock pricing increased to a new high of 98.66 percent, compared to an April low of 95.04 percent. The extreme reading warns that stocks are at 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

Robert Shiller’s CAPE index climbed above 40 for the first time ever outside of the Dotcom bubble. CAPE compares the S&P 500 index to a ten-year average of inflation-adjusted earnings.<\/p>\n

\"S&P<\/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