Current Market Valuation

Aggregate index score shown is the equally weighted average of our six core valuation models, shown below. Each model in the index uses historical data to determine a baseline. Current model values are expressed in terms of the current data's number of standard deviations above or below that baseline trend.

Updated August 5, 2022

CMV Aggregate Index Score - Speedometer Chart
CMV Aggregate Index Score - Timeline Chart

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.

Core Valuation Models

The Yield Curve Model: Overvalued

Updated August 4, 2022

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 2.68% and the 3-month is 2.41%, for a spread of 0.27%. Since 1950 the historic average spread has been 1.51%. The current spread is 1.0 standard deviations above the historic trend. We consider this Overvalued.

Chart: US Treasury Yields, 10-Year minus 3-Month Yield Spread
Chart: US Treasury Yields, 10-Year minus 3-Month Yield Spread

The Buffett Indicator Model: Overvalued

Updated August 4, 2022

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 $44.5T, the current GDP estimate is $24.9T, for a Buffett Indicator measure of 179%. This is 1.1 standard deviations above the historic trend of 127%. We consider this Overvalued.

Chart: US Market Value to GDP Ratio, % Over/Under Historic Trend
Chart: US Market Value to GDP Ratio, % Over/Under Historic Trend

The Price/Earnings Model: Overvalued

Updated August 5, 2022

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 30.5. This is 52% above the long-term historic trend CAPE of 20.1, or approximately 1.3 standard deviations above trend. We consider this Overvalued.

Chart: US Cyclicly Adjusted Price Earnings (CAPE) vs Historic Trend
Chart: US Cyclicly Adjusted Price Earnings (CAPE) vs Historic Trend

The Interest Rate Model: Fairly Valued

Updated August 5, 2022

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 ($4,145) is currently 1.1 standard deviations above its historical trend. The 10-year US Treasury interest rate is 2.68, about 1.1 standard deviations below trend. Netted together, this composite model suggests the total market is Fairly Valued.

Chart: Composite of Relative S&P500 vs Relative 10Y Treasury Bond Rates
Chart: Composite of Relative S&P500 vs Relative 10Y Treasury Bond Rates

The Margin Debt Model: Undervalued

Updated June 30, 2022

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 June 30, 2022, total US margin debt was $683B, a decrease of $279B year-over-year. This represents a yearly decrease of 0.73% of the value of the total US stock market. This is about 1.1 standard deviations below the historical trend, indicating the market is Undervalued.

Chart: 12-month Change in Real Margin Debt as a % of Total Market Value
Chart: 12-month Change in Real Margin Debt as a % of Total Market Value

S&P500 Mean Reversion Model: Overvalued

Updated August 5, 2022

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 $4,145, or approximately 40% above its exponential historic trend line. We consider this Overvalued.

Chart: S&P500 % From Exponential Trend Line
Chart: S&P500 % From Exponential Trend Line

Other Posts

Periodic posts - not necessarily related to market valuation, and not tied to our core valuation rating.

The Data on Day Trading

Posted July 2022

The Data on Day Trading

A collection of published, peer-reviewed studies on the performance of retail day traders.

Ending Payment for Order Flow

Posted June 2022

Ending Payment for Order Flow

The SEC wants to end Payment For Order Flow (PFOF). That is great news as PFOF incentivizes brokers to harm their retail traders.

The Impact of Narcissistic CEOs

Posted May 2022

The Impact of Narcissistic CEOs

White Paper Review: Narcissistic CEOs of public companies are shown empirically to be more likely to make adjustments to their firm's GAAP earnings. These adjustments are larger in scale, and lower in quality than adjustments made by non-narcisstic CEOs.

The Case for Transitory Inflation

Posted March 2022

The Case for Transitory Inflation

As inflation continues upward, a look back at what caused it and the Fed's response going forward.

Inflation vs. Interest Rates

Posted November 2021

Inflation vs. Interest Rates

Inflation is skyrocketing - how long can interest rates stay so low?

S&P500 P/E Ratio vs. Interest Rates

Posted November 2021

S&P500 P/E Ratio vs. Interest Rates

The stock market may be low given strong corporate earnings versus super-low interest rates.

Fed Balance Sheet vs. S&P500

Posted July 2021

Fed Balance Sheet vs. S&P500

Fed spending (quantitative easing) has been rising. Does this prop up stocks? Raise inflation?

Junk Bonds

Posted March 2021

Junk Bonds

Junk bond rates are super low, particularly when compared to Treasuries.

Federal Student Loan Crisis

Posted September 2020

Federal Student Loan Crisis

Student loan debt is absolutely out of control.

On The Radar

Timely links to external news and articles, usually valuation related, with occasional commentary. Most recent items shown below - for more, check the Radar page.

Thursday, 11 August 2022 Treasury Yield Curve Inversion Has Scope to Deepen

The two-year Treasury yield was 48 basis points above the 10-year rate on Wednesday, after coming within a whisker overnight of touching the 50-basis-point milestone last seen in August 2000. That’s based on expectations the Fed’s rate will peak at around 3.5%, from a current range of 2.25%-2.5%, according to the strategist.

If the expected peak rises a half point to 4% with no change in the market’s assessment of the neutral rate of monetary policy, the curve inversion has scope to widen to 85 basis points, Swiber wrote.

Despite the current rally, these indicators still point in the direction of upcoming weakness. Seems like we still have a long ways to go before we're out of the woods.

Tuesday, 26 July 2022 Myth of ‘Free’ Checking Costs Consumers Over $8 Billion a Year

Many Americans enjoy free checking accounts on the backs of the fees paid by poor people. Customers who pay overdraft fees again and again—who typically have no more than a few hundred dollars in the bank—are responsible for over half the profits from mass-market consumer checking accounts at the biggest US lenders.

For their part, bank executives see it differently, saying that customers who never make good on their overdrafts force them to write off millions of dollars. The fees, they argue, enable them to shoulder the costs and offer a lifeline to customers.

It is trivially easy for a bank to just disallow NSF charges, and they routinly do it when it serves their interest. But if they can instead bleed people dry with fees, they will. Wells Fargo, in particular, has proven time and again to be a leech on the American consumer.

Great article, with terrific graphics.

Why the Fed May Soon Need Treasury Help

When the Fed announces a higher target range for the federal-funds rate (currently 1.5% to 1.75%), it implements its decision by raising what it pays both on reserve balances (currently 1.65%) and on reverse repurchase agreements (currently 1.55%). Money to pay for these interest expenses comes out of the Fed’s interest earnings on its own portfolio.

The tricky situation the Fed now faces is that its own net interest income—$116.8 billion in 2021, of which 93% was remitted to the Treasury—will soon be exhausted by the higher interest rates it intends to pay on those combined cash funds. A target federal-funds range of 3.25% to 3.5% by year-end would have the Fed shelling out more than $195 billion annually to maintain both reserves and reverse repurchase agreements at current levels. The Treasury will have to advance funds to cover the gap.

Sunday, 24 July 2022 Weak Earnings Reports Aren’t Fazing Investors After Brutal Year for Stocks

So far this reporting season, shares of companies in the S&P 500 that have missed Wall Street’s earnings expectations have slipped 0.1% on average in the two days before their report through the two days after, according to FactSet. That compares with the five-year average of a 2.4% decline.

Tesla’s Bitcoin Dump Leaves Accounting Mystery in Its Wake

Tesla Inc. made waves this week when it announced that it had dumped the bulk of its Bitcoin stash. Selling 75% of its cryptocurrency gave the company a one-time cash infusion, Elon Musk’s electric car company said, but the battered value of its remaining Bitcoin also dinged profits.

Exactly how crypto helped and hurt Tesla’s bottom line is difficult to disentangle, however, based on what it told the public on earnings day. Current accounting rules—or lack thereof—play a big role.


“I’m anxious to see the actual filings—to see if they disclose the date that they sold, the price that they sold at,” said Aaron Jacob, head of accounting solutions at TaxBit, a cryptocurrency software company. “They may not disclose any of that.”

Tesla isn’t compelled to do so. No part of US generally accepted accounting principles spells out how companies must account for cryptocurrency or other digital assets, nor do they mandate the type of information companies must reveal in their footnote disclosures.

These kinds of gaps in reporting standards seem like exceptionally ripe territory for earnings manipulation, which is generally aligned with lower long-term value.

Tesla in February 2021 announced that it had bought $1.5 billion worth of crypto and that it would accept Bitcoin as payment for cars. Two months later, it sold 10% of its stake, generating $101 million from the sale. CEO Musk has touted the value of Bitcoin and cryptocurrency in general.

“This should not be taken as some verdict on Bitcoin,” Musk told analysts on Wednesday. “It’s just that we were concerned about overall liquidity of the company given the Covid shutdowns in China.”

It is absolute malpractice on the part of corp FP&A and Treasury to invest cash long-term and then need to pull it a year later due to highly-foreseeable liquidity issues. To have invested that cash into the most volitile possible asset class is unthinkable. This should have been sitting in a money market fund. Shareholders would riot about this at any other company.

Wednesday, 20 July 2022 More Than 100 Million Americans Face Dangerous Heat Wave

More than 100 million Americans were in the path of a dangerous heat wave Wednesday, from the West to the Northeast, officials said.

The temperature was forecast to break the triple digits in states across the country, from California to Texas to New York, shattering records in some places, according to the National Weather Service.

July has been a relentlessly hot month in Europe, too, where a record-breaking heat wave has been blamed for hundreds of deaths across the continent. The heat and a drought fueled wildfires across swaths of Southern Europe, forcing thousands of people to evacuate their homes.

What do you think will happen to global economies and corporate valuations as this inevitably gets worse? Do mass evacuations, property destruction, infrastructure destructions, and natural resource destruction raise valuations?

Microsoft Cuts Many Open Job Listings in Weakening Economy

Microsoft Corp. is eliminating many open jobs, including in its Azure cloud business and its security software unit, as the economy continues to weaken.

I'd put this one down in the "we're not at the bottom, yet" column...

Monday, 18 July 2022 Sen. Joe Manchin Balks at Global Minimum Tax

The Biden administration’s international tax agenda suffered a setback when Sen. Joe Manchin rejected a 15% minimum tax on multinational companies this past week, dimming prospects of turning last year’s global tax agreement into reality.

Now the administration must try to urge other countries to go first and hope that momentum, pressure and the potential for lost revenue can compel a future Congress to act.

Last October’s deal had two key pieces. One, the minimum tax, would put a 15% floor under corporate tax rates. It was designed to help countries raise revenue and prevent companies from shifting profits into low-tax jurisdictions. It was designed to be optional but with mechanisms that encourage nations to join once a critical mass of countries have implemented the tax. That is the part that Mr. Manchin blocked this past week.

Global tax inconsistencies are such a drain on productivity, and hurt medium sized companies the most (though, multinational mega-corps would surely love to pare down their multi-thousand-headcount tax departments, I'm sure). This deal is a real opportunity to make progress on this front.

As Fed Tightens, Economists Worry It Will Go Too Far

Economists increasingly expect the Federal Reserve, in its efforts to push down inflation, to raise rates enough to trigger a recession, with many worrying the central bank will go too far.

Economists surveyed by The Wall Street Journal now put the chance of a recession sometime in the next 12 months at 49% in July, on average, up from 44% a month ago and just 18% in January.


There are hints that higher rates are already starting to bite. In addition to falling home sales, the two-year Treasury yield has risen above the 10-year Treasury yield, what economists call a yield-curve inversion. Yield-curve inversions signal that investors expect higher interest rates in the short run to lead to declining economic activity and future rate cuts—and historically have preceded recessions by 12 to 18 months. However, Mr. Berson cautions that downturns occur only after other short-term rates (such as the federal-funds rate) also rise above longer-term rates, and that hasn’t occurred yet.

Recessions are bad, and a lot of people get hurt during them. But at this point the alternative to a recession may be quite a bit worse...

Sunday, 17 July 2022 Wall Street Set for New ETF Gold Rush as Single-Stock Era Begins

The booming world of exchange-traded funds is about to get even more crowded after the very first single-equity ETFs launched Thursday

The eight products from AXS Investments look like the start of a coming invasion of amped-up strategies that will seek to enhance or invert the performance of volatile companies.

“We’re gonna see the floodgate absolutely open with new product launches in this arena,” said Nate Geraci, president of The ETF Store, an advisory firm. “So I think we’re gonna see ETF issuers blanket the market with all varieties of these ETFs: leverage, inverse, options overlays, you name it.”

Commissioner Crenshaw warned about putting the ETFs in the hands of retail traders in particular, saying that it would be challenging for investment advisers to recommend the products while honoring their fiduciary duties.

This is like the moment where you can see a car accident is about to happen. These things are going to be absolutly poisenous for retail traders, but a lot of them are going to eat this up.

Thursday, 14 July 2022 Commodities Never Belonged in Your Portfolio

If investors get in at a peak chasing fad portfolio construction techniques, the returns can be much worse.

The Bloomberg Commodities Index is a good illustration. On a spot basis, it is up 351% in the past two decades, a respectable 7.8% compound annual growth rate that’s just slightly behind the S&P 500 Index’s 9.3%. But that’s not what investors earn when they invest through financial instruments because it doesn’t account for the cost of rolling such futures contracts. Among other things, there’s a sizable cost associated with storing barrels of crude oil, tanks of natural gas and bushels of wheat. In part because of these additional costs, the total return version of the same index — based on financial instruments that track the commodities — is up only 50% in the same period (a meager 2% compound annual growth rate).

Chasing fads pretty much everywhere and always results in lower performance over the long term than a simple diversified buy-and-hold strategy.

Fed Could Weigh Historic 100 Basis-Point Hike After Inflation Scorcher

Investors bet that the Fed is more likely than not to raise interest rates by 100 basis points when it meets July 26-27, which would be the largest increase since the Fed started directly using overnight interest rates to conduct monetary policy in the early 1990s. Americans are furious over high prices, and critics blame the Fed for its initial slow response.

Rip off the bandaid.

Wednesday, 6 July 2022 Wall Street Says a Recession Is Coming. Consumers Say It's Already Here

Goldman Sachs Group Inc. economists put the risk of such a slump in the US in the next year at 30%. A Bloomberg Economics model sees a 38% chance in the same period, with the risks building beyond that time frame. But for many it already feels like it’s here. More than one-third of Americans believe the economy is now in a recession, according to a poll last month by CivicScience.

The worries among small business owners, consumers and others are illustrated by so-called Misery Indexes, which blend unemployment and inflation rates. The gauge for the US is already 12.2%, similar to levels witnessed at the start of the pandemic and in the wake of the 2008 financial crisis, according to Bloomberg Economics.

Yield curve is still surprisingly neutral on recession odds - but at some point once there are X many "Are we in a recession?" headlines, the answer itself seems moot.

Wednesday, 29 June 2022 US Personal Spending Is Revised Sharply Lower in First-Quarter Data

US consumer spending expanded in the first quarter at the softest pace of the pandemic recovery, marking a surprise sharp downward revision that suggests an economy on weaker footing than previously thought. Outlays on goods and services rose an annualized 1.8%, compared with a 3.1% pace in the previous estimate, according to Commerce Department data out Wednesday.

Saturday, 25 June 2022 It’s time to say it: the US supreme court has become an illegitimate institution

Of the nine justices sitting on the current court, five – all of them in the majority opinion that overturned Roe – were appointed by presidents who initially lost the popular vote; the three appointed by Donald Trump were confirmed by senators who represent a minority of Americans. A majority of this court, in other words, were not appointed by a process that is representative of the will of the American people.


And now, this court, stacked with far-right judges appointed via ignoble means, has stripped from American women the right to control our own bodies. They have summarily placed women into a novel category of person with fewer rights not just than other people, but than fertilized eggs and corpses. After all, no one else is forced to donate their organs for the survival of another – not parents to their children, not the dead to the living. It is only fertilized eggs, embryos and fetuses that are newly entitled to this right to use another’s body and organs against that other’s will; it is only women and other people who can get pregnant who are now subject to these unparalleled, radical demands.

This raises a fundamental question: can a country be properly understood as a democracy – an entity in which government derives its power from the people – if it subjugates half of its population, putting them into a category of sub-person with fewer rights, freedoms and liberties?

The global trend suggests that the answer to that is no.

If you think economic health, market performance, and portfolio values will be unaffected by the US sliding into authoritarian rule, it's time to wake up.