We believe in fundamental analysis as the basis of any investment, and made CMV as a resource to quickly and easily track long-term indicators of market valuation. Current metrics suggest that the US stock market is Strongly Overvalued. You can view detail from our individual models below.
Note: While we hope that these models will be useful in putting this current market cycle into historical perspective, we do not make a claim that these will predict the market top or bottom. A global pandemic of this scale, combined with the economic depression that could follow, are unprecedented and markets may deviate materially from these historical trends.
Updated June 30, 2020 » The spread between 10-Year and 3-Month US Government debt was recently negative, illustrating an inverted yield curve. Historically, this has been a very reliable indicator of a recession in the following ~12-24 months after inversion, and recessions correlate with lower stock market returns. The last time this happened was 2006, right before the financial crisis. Before that: 2000, before the .com bust. In the last 50 years this indicator hasn't been wrong.More Info: Yield Curve »
Updated July 30, 2020 » The Buffett Indicator (named after Warren Buffett, who claims this as a favorite macroeconomic indicator) is the ratio of total US stock market valuation to GDP. This is currently 62% higher than its historical average, indicating the market is currently Strongly Overvalued.More Info: Buffett Indicator »
Updated July 31, 2020 » The P/E ratio is a fundamental measure of any security's valuation, indicating how many years of current profits it takes to recoup an investment. The aggregate S&P500 P/E (CAPE) ratio is 30.5, which is 55% above the modern-era market average of 19.6, putting the current P/E over 1 standard deviation above the average. This indicates that the market is Overvalued.More Info: Price/Earnings »
Updated July 31, 2020 » The S&P500 is currently trading 44% above its modern-era historical trendline, indicating that the market is Overvalued.More Info: S&P Mean Regression »