{"id":63032,"date":"2025-11-08T03:59:08","date_gmt":"2025-11-08T03:59:08","guid":{"rendered":"https:\/\/thepatientinvestor.com\/?p=63032"},"modified":"2025-11-08T04:06:55","modified_gmt":"2025-11-08T04:06:55","slug":"record-lows-and-highs-warn-of-trouble-ahead","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2025\/11\/08\/record-lows-and-highs-warn-of-trouble-ahead\/","title":{"rendered":"Record Lows and Highs spell trouble in the USA"},"content":{"rendered":"
\n
\"Bull\/Bear<\/div>\n
\"Stock<\/div>\n<\/div>\n

The gauge on the left indicates whether the market is in a bull or bear phase, and the one on the right reflects the current 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 advise investors to exercise caution when adding new positions.<\/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

Another indicator, the University of Michigan index of current economic conditions, plunged to 52.3, the lowest reading since the series began in 1960. The low reading would typically signal a recession, but has not yet been confirmed by either tighter financial conditions or a fall in the S&P 500.<\/p>\n

\"University<\/p>\n

The Chicago Fed National Financial Conditions Index turned up to -0.515 but continues to signal loose monetary conditions, which support high stock prices.<\/p>\n

\"Chicago<\/p>\n

The S&P 500 has not experienced a significant correction since April, and the 30-week Smoothed Momentum indicator continues to oscillate above zero.<\/p>\n

\"S&P<\/p>\n

Stock Pricing<\/h2>\n

Stock pricing eased slightly, to 98.32 percent from a new high of 98.66 percent last week, and 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 of 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 S&P 500 reached a new high of 3.28 times sales, compared to a long-term average of 1.80 times.<\/p>\n

\"S&P<\/p>\n

Conclusion<\/h2>\n

A record-low current economic conditions index and a record-high price-to-sales ratio for the S&P 500 both warn of instability ahead. Stock prices are supported by loose monetary conditions, but cannot hide the underlying economic fragility.<\/p>\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