Overview
- As of Dec. 5, the S&P 500 was up nearly 17% for 2025, with the Nasdaq up 22.1% and the Dow up 12.7%.
- A valuation measure back-tested to January 1871 is presented as portending trouble for the S&P 500 in 2026.
- The analysis describes the signal as historically strong but reiterates that no forecasting tool guarantees market direction.
- Investor enthusiasm this year stems from expectations of Federal Reserve rate cuts, stronger-than-forecast earnings, and advances in technologies such as artificial intelligence and quantum computing.
- The piece notes limitations of common yardsticks like the P/E ratio and frames potential sell-offs as opportunities for long-term investors.