Estimating The Downside
The April haircut in the S&P 500 (-8.8%) combined with February and January losses brought a few of our 1995-to-date “Estimating The Downside” measures very close to their 27-year medians for the first time in recent memory. At present, downside to the median is now -16%. Based on 1957-to-date, the S&P 500’s estimated downside to the median is -30%.
Back To Median Levels
This multi-factor estimate of stock market risk is based on a regression to median stock market levels. The valuation comparisons shown in the itemized tables consider all inflation periods since 1957. The summary tables present: 1) “all years” 1926-to-date; 2) periods of low (< 3%) inflation; and, 3) periods of high (> 5%) inflation.
The S&P 500 gained another 3.7% in December to close the year with a price return of +16.3%.