Understand US Stock Market Valuation
CMV tracks long-term stock market valuation models, as well as market sentiment and economic indicators tailored for financial professionals, advisors, and retail investors. Explore our tools to evaluate whether the market is overvalued or undervalued, and become a member (7-day free trial) for access to premium models, more data and analysis, and weekly data updates.
This data is an educational resource to better understand market and business cycles. While these cycles often correlate well with stock performance, the analysis should not be used as a short-term trading strategy, or as some kind of implied get-rich-quick scheme. If you're looking for investment advice, you can find our perspective here.
Each of our models 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. More information on model ratings is available here.
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Aggregate Market Value Index
Available only to members, this is our aggregate score of the current valuation of the US stock market.
See how the index correlates against future stock market returns.
Market Valuation Models
Buffett Indicator: Strongly Overvalued
The Buffett Indicator is the ratio of the total value of the US stock market versus the most current measure of total GDP. When this value is very high it suggests the stock market is overpriced relative to actual economic productivity.
Price/Earnings Model: Strongly Overvalued
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").
Interest Rate Model: Overvalued
Low interest rates should generally drive higher equity prices. This model examines the relative S&P500 position given the relative level of interest rates.
S&P500 Mean Reversion: Strongly Overvalued
The S&P500 tends to be mean-reverting over very long time periods. Below shows the real (inflation adjusted) S&P500 price, along with an exponential trend line, and standard deviation bands.
Earnings Yield Gap: Fairly Valued
A model comparing the earnings yield of the S&P500 against the earnings yield of US Treasury bonds, illustrating the relative value of one against the other.
Recession Indicator Models
Yield Curve Model: Very High Recession Risk
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. Chart shows this spread, with standard deviation bands for context.
Sahm Rule Model: Normal Recession Risk
The Sahm rule is a recession indicator that triggers when the three‐month moving average of the national unemployment rate rises by at least 0.50 percentage points from its lowest level in the previous 12 months. It measures how quickly unemployment is rising/falling, and is an accurate and timely indicator of when the US economy is in a recession.
State Coincidence Index: Normal Recession Risk
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.
Market Sentiment Models
Margin Debt: Neutral Sentiment
Margin debt is money investors borrow to invest in stocks. High margin debt indicates bullish investors, and tends to lead stock market corrections, particularly after margin rates begin falling from their peak. This model tracks year-over-year changes in margin as a percent of total stock market value.
Junk Bond Spreads: Optimistic Sentiment
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 for relatively low incremental return. Note the inverted y-axis.
VIX Fear Index: Neutral Sentiment
The VIX Index is derived from SPX options prices and represents the amount of volatility investors expect over the coming 30 days. The index has no valence and does not formally predict bear or bull markets. In practice however, high VIX values represent market fear of upcoming volatility, which tends to correlate with market crashes. Alternately, low VIX values indicate market stability and bullish sentiments.
Economic Policy Uncertainty: Pessimistic Sentiment
The Economic Policy Uncertainty index is a time-series measure of uncertainty in future US economic policy; i.e., uncertainty over future interest rates, taxes, tariffs, and other government-controlled fiscal and monetary policy.
This model, like our other Sentiment Indicators, is a contrarian indicator.
