This Economic Indicator Called 2 of the Worst Bear Markets in History — and It’s Flashing Red Again The S&P 500 (SNPINDEX: ^GSPC) has reached yet another record high, surging by nearly 20% from its low point in late March, as of this writing.
All of this explosive growth has a hidden downside, however: It could mean that the market is overvalued right now
If that’s the case, a pullback could be on the horizon. While nobody can say exactly where stocks are headed in the near term, this economic indicator soared just ahead of the Great Depression and the dot-com bubble burst in the early 2000s — and it’s nearing yet another peak. Here’s what that might mean for your investments.
The stock market could be sounding a warning The S&P 500 Shiller CAPE Ratio is a popular metric that compares the current price of the S&P 500 to its 10-year inflation-adjusted earnings, and it attempts to predict how future stock prices will fare. A higher ratio suggests a higher valuation, and historically, stock prices tend to fall in the years after the CAPE ratio reaches a new peak. The metric surged dramatically in the late 1920s, surpassing 30 just before the market sank into the Great Depression.