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This Is, Officially, the 3rd Priciest Stock Market in Over 150 Years
Posted on 7/29/25 at 4:40 am
Posted on 7/29/25 at 4:40 am
quote:
This Is, Officially, the 3rd Priciest Stock Market in Over 150 Years -- and There's No Mistaking What Comes Next for Stocks, Based on History
by Sean Williams
July 29, 2025
Key Points
• With the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average staging one of their strongest intra-year reversals in history, stock valuations have moved to nosebleed territory.
• The previous two instances where the S&P 500's Shiller price-to-earnings (P/E) Ratio hit 39 didn't end well for investors.
• Thankfully, elevator-down moves on Wall Street tend to be short-lived, with bull markets lasting disproportionately longer than bear markets.
This is one of the priciest stock market's dating back to 1871
To preface the following discussion, no predictive tool or forecasting indicator can ever guarantee short-term directional moves in the S&P 500, Nasdaq Composite, or Dow Jones Industrial Average. If there were a surefire forecasting tool, you can rest assured that every investor would be using it by now.
...
When most folks assess value, they often lean on the time-tested P/E ratio, which divides a company's share price by its trailing-12-month earnings per share (EPS). The issue with the P/E ratio is that recessions and shock events can render it useless. This is where the S&P 500's Shiller P/E comes into play.
The Shiller P/E is based on average inflation-adjusted EPS over the prior 10 years. Since shock events and recessions tend to be short-lived, they can't skew the results for the Shiller P/E in the same way they can with the traditional P/E ratio.
In December, the S&P 500's Shiller P/E hit a closing high during the current bull market of 38.89. But on Friday, July 25, it surpassed this mark with a closing multiple of 38.97. This is now, officially, the third-priciest continuous bull market when back-tested to January 1871.
There are only two previous instances where the Shiller P/E has been higher than 38.97 -- and the end result wasn't pretty for investors either time
...
In fact, all five prior occurrences (not including the present) where the Shiller P/E Ratio has surpassed 30 and held this level for at least two months were eventually followed by declines in one or more of the major stock indexes ranging from 20% to as much as 89% (during the Great Depression).
LINK
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Posted on 7/29/25 at 6:17 am to NC_Tigah
I have a general view that the stock market is not going to decline until unemployment starts to climb. The bulk of white collar America’s (and a large portion of people around the globe), myself included, scrape 10-20% of their income into the stock market monthly via 401ks, IRAs, 529s, HSAs, etc.
This post was edited on 7/29/25 at 10:36 am
Posted on 7/29/25 at 7:14 am to IMSA_Fan
Sell it all!!!
Posted on 7/29/25 at 7:29 am to IMSA_Fan
quote:
The bulk of white collar America’s (and a large portion of people around the globe), myself included, scrape 10-20% of their income into the stock maker monthly via 401ks, IRAs, 529s, HSAs, etc.
I agree with this.
However compared to the past there is one glaring issue that is becoming a big problem.
Over 33% of the S&P500 is composed of 7 companies
1 Nvidia NVDA 7.60%
2 Microsoft MSFT 6.64%
3 Apple Inc. AAPL 5.56%
4 Amazon AMZN 4.31%
5 Meta META 3.15%
6 Broadcom AVGO 2.43%
7 Alphabet A GOOGL 2.08%
8 Alphabet C GOOG 1.97%
Not even counting Tesla which is not far behind these 7. The S&P500 is much more concentrated than ever before. And investors do not seem to care about outsized PEs like the last dotcom bust.
Luckily it is not as bad as most of the big boys are not completely crazy, but the concentration is a problem. Since they have become so reliant on each other. Once say Apple iPhone sales slow, then it brings down all the rest
Posted on 7/29/25 at 7:46 am to UltimaParadox
quote:
And investors do not seem to care about outsized PEs like the last dotcom bust
Until they do.
Play hypotheticals. If anything disrupts this AI capital flow, valuations get reset quick.
Posted on 7/29/25 at 9:25 am to NC_Tigah
Joe Brown has an interesting take. If you price assets in gold instead of dollars, the market is not overvalued. Bottom line, stocks can be a hedge against inflation. The 8-minute video is worth watching. At least start at the 5-minute mark for the point he's making. Here is the transcript taken from the show (It is not grammatically correct, so don't give me any crap about it.):
quote:
Price Assets in Gold, Not Dollars chart of the S&P 500 priced in gold instead of dollars. For reference, this is the S&P 500 priced in dollars. So when you price the S&P 500 in terms of gold instead of dollars, you get a much different picture. This runup and then crash you see was the Great Depression. This runup that you see following the 1940s is the post Bretonwoods agreement. This crash that you see starting around 1971 was from the end of the Brettonwoods agreement delinking from gold and having gold skyrocket to its proper value again. So stocks relative to gold became very cheap again. This big runup in stocks compared to gold was the dot bubble. This collapse in the price of Stocks compared to gold was both the crash in stocks that happened as of the dotcom bubble bursting and the great financial crisis, but also the bubble that occurred in gold up until 2011. Real Estate in Gold Terms Stocks have had some massive bull markets since then, but also so has gold, which has put the current pricing of the S&P 500 compared to gold in a very normal and comfortable range historically speaking going all the way back to the 1960s. Now, if pricing stocks in gold doesn't prove the point by itself, let's price something else in gold that also seems historically overvalued right now, and that is US real estate. You might be shocked to see this chart, but homes in the United States are not expensive right now when priced in gold. In fact, they're at one of the cheapest places they've ever Maybe the Dollar is the Problem been. So, with some of these assets like Bitcoin and real estate and the stockmarket being at some of the highest prices they've ever been in history and these valuation metrics like the Schiller PE ratio and the Buffett indicator being at the most extended they've been, it's becoming clear that these things are expensive compared to dollars. Which means that maybe the problem is not with the valuation of the assets or the price. Maybe the problem is with the denominator, the dollar.
Posted on 7/29/25 at 10:36 am to LSURussian
quote:
It's getting close to the time to be fearful.
So what percent are you converting to cash?
Posted on 7/29/25 at 11:03 am to NC_Tigah
A fellow teacher of mine looked at the SP500 chart, saw the huge recent increases, and said "no way I'm puttin' my money in that!"
The year was 2015, or 210% ago...
The year was 2015, or 210% ago...
Posted on 7/29/25 at 11:20 am to NC_Tigah
I've been selling some of my runners the last 2 months
Posted on 7/29/25 at 12:11 pm to Nonetheless
if ever in doubt, zoom out. The stock market is still a safe market for a long-term hold.
In the 4 largest one day declines in history, within 12 months all 4 had rebounded 150%
In the 4 largest one day declines in history, within 12 months all 4 had rebounded 150%
This post was edited on 7/29/25 at 8:05 pm
Posted on 7/29/25 at 12:24 pm to UltimaParadox
quote:
The S&P500 is much more concentrated than ever before.
I don’t know about that. If this list really goes back to 1871, the mag 7 is kind of diluted in an ironic fashion. What did investors have at the turn of the 19th century?
Ford
Standard Oil
Carnegie steel
JP Morgan
?
Posted on 7/29/25 at 12:37 pm to NC_Tigah
The Third Bank of the United States will continue to debase the dollar due to our debt, so the price of stocks, gold, and bitcoin will continue to rise if priced against the dollar.
Posted on 7/29/25 at 1:00 pm to Enadious
quote:I'm at 37% cash in my Schwab accounts now. You?
So what percent are you converting to cash?
Posted on 7/29/25 at 2:27 pm to lsuconnman
The S&P first list (233 companies) was complied in 1923.
General Electric is the only original Dow Jones list member still listed.
The Dow started in 1896.
Here's the list of the 12 members on January 1, 1900:
General Electric is the only original Dow Jones list member still listed.
The Dow started in 1896.
Here's the list of the 12 members on January 1, 1900:
Posted on 7/29/25 at 2:57 pm to soccerfüt
I still regret selling my shares of American Tobacco after it was dropped from the DOW in 1899.
Posted on 7/29/25 at 3:20 pm to Nonetheless
quote:
I've been selling some of my runners the last 2 months
Thats always a tough one because some of those runners just keep running after you sell it. I sold a couple of those way to early like NFLX,McKesson and a few others come to mind. Not sure they ever get back to where i sold them.
Posted on 7/29/25 at 6:04 pm to IMSA_Fan
quote:
The bulk of white collar America’s (and a large portion of people around the globe), myself included, scrape 10-20% of their income into the stock market monthly via 401ks, IRAs, 529s, HSAs, etc.
Seriously. The stock market is buoyed by the fact it's the only accessible investment vehicle for the masses.
Things like real estate or crypto or futures trading, all that shite is way too inaccessible or complicated for the average joe.
There's really no other place for excess money to end up.
Posted on 7/29/25 at 10:03 pm to StansberryRules
quote:
There's really no other place for excess money to end up
Sure if you’re lazy AF
Posted on 7/29/25 at 10:04 pm to NC_Tigah
Everyone's retirement is stock market based. This is a nothingburger. It will go even higher.
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