If a Stock Market Crash Is Coming, History Says This Is the Smartest Move to Make
Investors shouldn't try to predict a market crash.
Recent warning signs suggest that the stock market may be significantly overvalued. Market experts point to several concerning indicators. The cyclically adjusted price-to-earnings (CAPE) ratio for the S&P 500 has been increasing and has recently remained above 40 for three consecutive months. This metric, devised by economist Robert Shiller, aims to mitigate the effects of earnings volatility by utilizing a 10-year average of inflation-adjusted earnings.
The CAPE ratio has seldom exceeded this level before, with its last record-high period occurring just prior to the dot-com bubble burst. The current reading, which is more than double the metric's historical average of around 17, is nearly 50% higher than its 20-year average.
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