Current Market Valuation
CMV tracks various economic models highlighting the current state of the US stock market and broader economy. This data is an educational resource to better understand market and business cycles, it is not intended to be used as a short term trading strategy.
Each model uses historical data to determine a baseline, and expresses current values in terms of the current data's number of standard deviations above or below that baseline trend.
Models are updated at end of each week, or as data becomes available. For much more detail on each model, click into their respective detail pages, below.
Updated March 24, 2023
Market Valuation Models
The Buffett Indicator Model: Fairly Valued
Updated March 24, 2023
Summary: The Buffett Indicator is the ratio of the total value of the US stock market versus the most current measure of total GDP.
Currently: The total US stock market is worth $42.25T, the current GDP estimate is $26.35T, for a Buffett Indicator measure of 160%. This is 0.8 standard deviations above the historic trend of 129%. We consider this Fairly Valued.
The Price/Earnings Model: Overvalued
Updated March 24, 2023
Summary: The PE Ratio Model tracks the ratio of the total price of the US stock market versus the total average earnings of the market over the prior 10 years (aka the Cyclicly Adjusted PE or CAPE).
Currently: The current CAPE ratio is 28.0. This is 39.0% above the long-term historic trend CAPE of 20.2, or approximately 1.0 standard deviations above trend. We consider this Overvalued.
The Interest Rate Model: Fairly Valued
Updated March 24, 2023
Summary: Low interest rates should generally drive higher equity prices. This model examines the relative S&P500 position given the relative level of interest rates.
Currently: The current S&P500 ($3,971) is currently 0.9 standard deviations above its historical trend. The 10-year US Treasury interest rate is 3.38, about 0.84 standard deviations above trend. Netted together, this composite model suggests the total market is Fairly Valued.
S&P500 Mean Reversion Model: Overvalued
Updated March 24, 2023
Summary: An extremely straightforward model stipulating that at some point, eventually, the S&P500 will tend to return towards its historic trend line.
Currently: The S&P500 is at $3,971, or approximately 34% above its exponential historic trend line. We consider this Overvalued.
Recession Indicator Models
The Yield Curve Model: Very High
Updated March 24, 2023
Summary: When short term (3-month) Treasury yields are higher than long term (10-year) yields, it is a bearish signal that is almost always followed by economic recession.
Currently: The 10-year Treasury rate is 3.38% and the 3-month is 4.74%, for a spread of -1.36%. Since 1950 the historic average spread has been 1.41%. The current spread is 2.3 standard deviations above the historic trend, indicating Very High risk of upcoming recession.
The State Coincidence Index Model: Normal
Updated December 31, 2022
Summary: A State Coincidence Index (SCI) is an aggregate measure of individual state economic health. This model charts the number of states with month-over-month declines in their SCI. On average, if more than 25 states are in decline, the US overall is entering a recession.
Currently: As of December 31, 2022 there are 16 states with a decreasing SCI, indicating a Normal risk of upcoming recession.
Market Sentiment Models
The Margin Debt Model: Neutral
Updated February 28, 2023
Summary: Margin debt is money investors borrow to invest in stocks. High margin indicates bullish investors, and tends to lead stock market corrections, particularly after margin rates begin falling from a peak. This model looks at changes in margin as a percent of total stock market value.
Currently: As of February 28, 2023, total US margin debt was $624B, a decrease of $261B year-over-year. This represents a yearly decrease of 0.65% of the value of the total US stock market. This is about 0.97 standard deviations below the historical trend, indicating the market is Neutral.
Junk Bond Spread Model: Neutral
Updated March 23, 2023
Summary: High junk bond spreads indicate bearish sentiment as investors require very high compensation for taking on additional credit risk. Low junk bond spreads indicate bullish investors are eager to take on risk, even for relatively low return, compared to safer investments.
Currently: Junk bond yields are 5.10% higher than US Treasury bond yields, which is 0.1 standard deviations below the historical average spread of 5.43%, indicating that market sentiment is currently Neutral.
