Models last updated as of December 1, 2023

Aggregate Market Value Index


Updated December 1, 2023. The Aggregate Market Value Index model (AMVI) is a composite index of several of our market valuation models, providing a high-level view of current US stock market prices relative to historical valuation trends. This provides an idea of how overbought or oversold the market may be. The model is updated at least weekly.

CMV Aggregate Index Score - Speedometer Chart

This view shows our AMVI score over time. Notice that the market infrequently goes outside of the +/- 1 standard deviation range, and almost never passes beyond +/- 2 standard deviations.

This view is the same chart as before, but also shows (in purple) the 5-year subsequent S&P500 returns on any given date. Hover over the chart for more detailed values. Notice that very high AMVI datapoints are paired with low (or negative) future S&P500 returns. Likewise, very low AMVI scores tend to correlate well with very high subsequent S&P500 returns.

This view shows the same data as before, but now presented as a scatterplot. Each dot represents a month-end value since 1962, showing the AMVI score on the x-axis, and subsequent 5-year S&P500 returns on the y-axis. Notice that the data trend tends to have a downward slope. This indicates that as AMVI scores go from negative (undervalued) to positive (overvalued), the subsequent S&P500 returns get worse and worse.

The blue line shows the linear regression of the data (R-squared value of 0.41).

While the intention is to present a view of overall market valuation, and therefore a signal as to market upside or downside, this is not a short term trading model. Markets can stay extremely under or over valued for long periods of time. Trying to time the market, even using long term business cycles such as this, has historically underperformed a buy-and-hold investment strategy.

Market Valuation Models


The Buffett Indicator Model: Overvalued

- Updated Weekly, last on December 1, 2023 - Click/drag chart to zoom - menu on right to download/share -

Chart shows Buffett Indicator ratio as # of standard deviations above/below its historic average.

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. For more detail, charts, and sources, visit the Buffett Indicator Model page.

Chart shows the US Buffett Indicator value alongside its exponential trend line, dotted.

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. For more detail, charts, and sources, visit the Buffett Indicator Model page.

Current US Stock Market Value $48.84 (T)
Current Forecasted GDP $27.73 (T)
Current Buffett Indicator (BI) Ratio 176.2%
Historical Trend BI Ratio 121.4%
Current Position Relative to Trend (%) 45% above trend
Current Position Relative to Trend (SDs) 1.5 standard devs above trend
Rating Overvalued

The Price/Earnings Model: Overvalued

- Updated Weekly, last on December 1, 2023 - Click/drag chart to zoom - menu on right to download/share -

Chart shows current CAPE value as # of standard deviations above/below historic average.

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). For more detail, charts, and sources, visit the PE Model page.

Chart shows CAPE ratio value over time.

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). For more detail, charts, and sources, visit the PE Model page.

Current SP500 Price $4,595
Current S&P500 Yearly Earnings $195/sh
Current S&P500 P/E Ratio 23.6
Current S&P500 10-Year Earnings Ave $123/sh
Current S&P500 CAPE Ratio 30.6
Historic Average CAPE Ratio 20.2
Current Position Relative to Average (%) 51.5% above average
Current Position Relative to Average (SDs) 1.3 standard devs above trend
Rating Overvalued

The Interest Rate Model: Fairly Valued

- Updated Weekly, last on December 1, 2023 - Click/drag chart to zoom - menu on right to download/share -

Chart shows Interest Rate Valuation Model as # of standard deviations above/below historic model average.

Low interest rates should generally drive higher equity prices. This model examines the relative S&P500 position given the relative level of interest rates. For more detail, charts, and sources, visit the Interest Rate Model page.

Current 10Year Tsy Bond Rate 4.22%
Ave 10Y Tsy Bond Rate (Since 1962) 5.87%
Current 10Y Bond Rate Relative to Average (SDs) 0.55 standard devs below average
Current S&P500 Price $4,595
S&P500 Exponential Trend Value $3,142
Current S&P500 Price Relative to Trend (SDs) 1.3 standard devs above trend
Composite SP500 Price relative to Current Interest Rates 0.76 standard devs above trend
Rating Fairly Valued

S&P500 Mean Reversion Model: Overvalued

- Updated Weekly, last on December 1, 2023 - Click/drag chart to zoom - menu on right to download/share -

Chart shows S&P500 as # of standard deviations above/below its historic trendline value.

A straightforward model stipulating that eventually the S&P500 will tend to return towards its historic trend line.For more detail, charts, and sources, visit the Mean Reversion Model page.

Chart shows nominal (non-inflation adjusted) S&P500 price data, with the long term exponential regression trend line.

A straightforward model stipulating that eventually the S&P500 will tend to return towards its historic trend line.For more detail, charts, and sources, visit the Mean Reversion Model page.

Current S&P500 Price $4,595
S&P500 Exponential Trend Value $3,142
Current S&P500 Price Relative to Trend (%) 46% above trend
Current S&P500 Price Relative to Trend (SDs) 1.3 standard devs above trend
Rating Overvalued

Recession Indicator Models


The Yield Curve Model: Very High

Note: This model aims to predict risk of upcoming recession

- Updated Weekly, last on December 1, 2023 - Click/drag chart to zoom - menu on right to download/share -

Chart shows spread between 10-year and 3-month Treasury debt. Standard deviations above/below the historical average spread are shown in vertical bands. Inversions (where 10-year yields are lower than 3-month yields) are highlighted in red.

Yield curve inversions highlighted red. 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. For more detail, charts, and sources, visit the Yield Curve Model page.

Chart shows the current yield curve (as well as prior two month end curves).

Typical curve should slope upwards as long-duration investments demand higher returns. A downward sloping curve suggests investors think long term interest rates will be falling sharply in the future. Downward sloping yield curves have very reliably preceded economic recessions. For more detail, charts, and sources, visit the Yield Curve Model page.

Current 3-Month Treasury Yield 5.43%
Current 10-Year Treasury Yield 4.22%
Current 10Y-3Mo Spread -1.21%
Average 10Y-3Mo Spread 1.37%
Current Position Relative to Average (SDs) 2.7 standard devs above average
Rating Risk of upcoming recession is:
Very High

The State Coincidence Index Model: High

Note: This model aims to predict risk of current recession

- Updated Monthly, last on October 1, 2023 - Click/drag chart to zoom - menu on right to download/share -

Chart shows # of US states with shrinking month-over-month coincidence indicator scores. National recessions are shaded.

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 values, as compiled by the Philadelphia Fed. On average, if more than 25 states are in decline, the US overall has entered a recession.

Chart data is from the Philadelphia Federal Reserve and only available monthly. For more detail, charts, and sources, visit the State Coincidence Indicator Model page.

Current number of states with declining SCI: 32
Average number of states with declining SCI: 8.97
Rating Risk of current recession is:
High

Market Sentiment Models


The Margin Debt Model - Sentiment is: Neutral

- Updated Monthly, last on October 31, 2023 - Click/drag chart to zoom - menu on right to download/share -

Chart shows year-over-year changes in total margin debt levels, as % of total market value. Standard deviation bands are also shown.

Margin debt is money investors borrow to invest in stocks. High margin debt indicates bullish investors who borrow money to invest in stocks, and tends to lead stock market corrections, particularly after margin rates begin falling from their peak. This model looks at year-over-year changes in margin as a percent of total stock market value. For more detail, charts, and sources, visit the Margin Debt Model page.

Chart shows margin debt levels as % of total market value.

Margin debt is money investors borrow to invest in stocks. High margin debt indicates bullish investors who borrow money to invest in stocks, and tends to lead stock market corrections, particularly after margin rates begin falling from their peak. This model looks at year-over-year changes in margin as a percent of total stock market value. For more detail, charts, and sources, visit the Margin Debt Model page.

Current Margin Debt Amount $635(B)
Year-over-year (YoY) Change in Margin Debt $35(B)
YoY Change in Margin Debt as % of Total Stock Market Value 0.08%
Above value in terms of standard deviations 0.36 standard devs below trend
Rating Market sentiment is
Neutral

Junk Bond Spread Model: Neutral

- Updated Weekly, last on December 1, 2023 - Click/drag chart to zoom - menu on right to download/share -

Chart shows historical spread between junk bonds and equal maturity Treasury bonds.

High junk bond spreads (low values on chart) indicate pessimistic sentiment as investors require very high compensation for taking on the additional credit risk of low quality bonds. Low junk bond spreads indicate optimistic investors eager to take on risk, even for relatively low return, compared to safer treasury investments. For more detail, charts, and sources, visit the Junk Bond Spreads Model page.

Chart shows historical spread between junk bonds and 10-Year Treasury bonds.

High junk bond spreads indicate pessimistic sentiment as investors require very high compensation for taking on the additional credit risk of low quality bonds. Low junk bond spreads indicate optimistic investors eager to take on risk, even for relatively low return, compared to safer treasury investments. For more detail, charts, and sources, visit the Junk Bond Spreads Model page.

Current Spread of Junk Bonds over US Treasury Bonds 3.84
Average spread 5.39
Current position versus average (SDs) 0.6 standard devs above trend
Rating Market sentiment is
Neutral

VIX Model: Neutral

- Updated Weekly, last on December 1, 2023 - Click/drag chart to zoom - menu on right to download/share -

Chart shows VIX value since inception.

The VIX index is a mathematical measure of expected volatility in the S&P500 over the next 30 days. For example, a VIX of 20 indicates that the market expects the S&P500 to go either up or down over the next 30 days at a 20% annualized rate (or about 1/12th of 20% over the next 30 days). While the VIX does not make a claim if the market is over or under valued, in practice very high values of the VIX tend to preceed market crashes. For more detail, charts, and sources, visit the VIX Fear Index Model page.

Chart shows recent S&P500 values and the VIX-implied volatility expected over the next 30 days.

The VIX index is a mathematical measure of expected volatility in the S&P500 over the next 30 days. For example, a VIX of 20 indicates that the market expects the S&P500 to go either up or down over the next 30 days at a 20% annualized rate (or about 1/12th of 20% over the next 30 days). While the VIX does not make a claim if the market is over or under valued, in practice very high values of the VIX tend to preceed market crashes. For more detail, charts, and sources, visit the VIX Fear Index Model page.

Current VIX Value 12.63
Average VIX 19.53
Current position versus average (%) 35% below average
Current position versus average (SDs) 0.9 standard devs below average
Rating Market sentiment is
Neutral