A Key Stock Valuation Metric Just Made a Decidedly Clear Move. History Says This Happens Next.
Stocks sank in the first several weeks of the year, with the S&P 500 and the Nasdaq posting their worst quarters since 2022. But prior to that moment, these indexes delivered two straight years of explosive gains, led by growth stocks and artificial intelligence (AI) players. Investors were excited about signs of lower inflation and the possibility of interest rate cuts -- and they chose stocks that could thrive the most in a strong economic environment.All of this led to a huge run-up in stock prices, with one particular valuation metric reaching a level it only hit twice before since the 1950s, when the S&P 500 launched in its current form. So, as a whole, the market became more and more expensive over the past couple of years, leaving certain stocks trading at record levels.In recent weeks though, the mood in the market has shifted. President Donald Trump's initial talks of tariffs on imports -- and his formal announcement of them this week -- have weighed on investor sentiment. The concern is these tariffs will lift prices and therefore hurt both earnings and economic growth. All of this has weighed on stock performance, and it's pushed the S&P 500 Shiller CAPE ratio to make a decidedly clear move. Let's check out what history says may happen next.Continue reading

Stocks sank in the first several weeks of the year, with the S&P 500 and the Nasdaq posting their worst quarters since 2022. But prior to that moment, these indexes delivered two straight years of explosive gains, led by growth stocks and artificial intelligence (AI) players. Investors were excited about signs of lower inflation and the possibility of interest rate cuts -- and they chose stocks that could thrive the most in a strong economic environment.
All of this led to a huge run-up in stock prices, with one particular valuation metric reaching a level it only hit twice before since the 1950s, when the S&P 500 launched in its current form. So, as a whole, the market became more and more expensive over the past couple of years, leaving certain stocks trading at record levels.
In recent weeks though, the mood in the market has shifted. President Donald Trump's initial talks of tariffs on imports -- and his formal announcement of them this week -- have weighed on investor sentiment. The concern is these tariffs will lift prices and therefore hurt both earnings and economic growth. All of this has weighed on stock performance, and it's pushed the S&P 500 Shiller CAPE ratio to make a decidedly clear move. Let's check out what history says may happen next.