{"id":63169,"date":"2025-11-22T01:57:12","date_gmt":"2025-11-22T01:57:12","guid":{"rendered":"https:\/\/thepatientinvestor.com\/?p=63169"},"modified":"2025-11-22T02:10:06","modified_gmt":"2025-11-22T02:10:06","slug":"us-bear-market-extreme-pricing","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2025\/11\/22\/us-bear-market-extreme-pricing\/","title":{"rendered":"US Bear Market & Extreme Pricing"},"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 in relation to earnings, but it is a poor indicator of market timing<\/strong>. We do not recommend selling stocks because the market valuation is high; however, we recommend exercising caution when adding new positions.<\/p>\n

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

The Bull\/Bear indicator remains at 40%, signaling a bear market ahead. We have received updates for two of the three market indicators that were delayed by the US government shutdown, but are still waiting on an update for heavy truck sales (marked in orange below).<\/p>\n

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

The Chicago Fed National Financial Conditions Index eased to -0.538 on November 14, indicating loose monetary conditions that support high stock prices.<\/p>\n

\"Chicago<\/p>\n

However, a steep plunge in Bitcoin over the last few days warns of a liquidity contraction that will likely show up in financial conditions in the next few weeks.<\/p>\n

\"Bitcoin<\/p>\n

Continued unemployment claims increased to almost 2 million, while the unemployment rate rose to 4.4%, both reflecting a slowly deteriorating labor market.<\/p>\n

\"Continued<\/p>\n

Of greater concern is the loss of 100 thousand jobs in cyclical sectors since February. A fall of 300 thousand from the February high would signal risk-off. Employment in manufacturing, construction, and transport and warehousing accounts for sizable job losses during a recession, which typically triggers an economic contraction.<\/p>\n

\"Jobs<\/p>\n

Stock Pricing<\/h2>\n

Stock pricing decreased slightly to 98.15 percent, compared to a high of 98.66 percent in late October and an April low of 95.04 percent. The extreme pricing 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 climbed to a record high of 3.28 times sales, compared to its long-term average of 1.8 times sales, an 82% premium.<\/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