Which Leading Indicators Best Predict Market Declines?
Understanding How Reliable—Or Unreliable—Widely-Followed Indicators Are for Predicting Market Declines
In this research, we look at the accuracy and consistency of "overvaluation" alarms from 7 widely-followed leading indicators. Going back to 1950, we measure indicators' correlations with S&P 500 forward returns and how early of a warning they gave investors.
Our findings aim to give advisors, planners, and their clients additional perspective on the reliability of valuation indicators, and help prepare themselves for possible market declines.