Research.LeutholdGroup

The S&P 500 shed 4.8% in September—its worst month since the panic of March 2020. This trimming of the numerator helped make our downside to median estimates a little less negative. In fact, these are the “best” figures we’ve seen since February.

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The S&P 500 stayed on cruise control in August, notching its seventh consecutive monthly gain. During that streak, our downside to median estimates have remained in a tight range as both numerators and denominators increased.

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Make that six consecutive months of advances for the S&P 500. Since the end of January, the index has gained 18% (price return) while our downside-to-median estimates have widened very little, to -43% from -41% (1957-to-date) and to -32% from -29% (new era 1995-to-date).

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The S&P 500 posted its fifth consecutive monthly advance in June and its fifth consecutive quarterly advance as we closed out Q2-21. The index’s 8.2% second quarter gain has not exacerbated our downside-to-median estimates, which stand exactly where they did at the end of March.

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The S&P 500 posted its fourth consecutive winning month in May. It was a modest gain (+0.6%), but all of our downside estimates managed to improve—a testament to the rapidly rising fundamentals.

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As the S&P 500 continues setting new records, so do our downside-to-median estimates. Once again, dramatically improving fundamentals could not keep pace with the index’s rise in price.

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The S&P 500 gained 4.2% in March. Again, as has been the case since last summer, improving underlying fundamentals have not been able to offset the rise in the index’s price.

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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.

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The S&P 500 had a monthly loss of 1% to start 2021. This moved our downside-to-median estimate just a tick under its contemporary extreme of -42%.

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The S&P 500 gained another 3.7% in December to close the year with a price return of +16.3%.

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The S&P 500 ripped to new all-time highs in November, posting a 10.8% gain. This move pushed our downside to median estimate for the index from -36% to -41%.

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Late-month weakness led to another monthly decline in the S&P 500. Now down roughly 7% since the end of August, our downside-to-median estimate has moved from -42% to today’s -36%.

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The S&P 500 broke a five-month winning streak and stumbled -3.9% in September.

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The S&P 500 continued to shrug off long-term valuation averages, gaining 7% in August.

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The S&P 500 gained another 5.5% in July and now stands 49% above its lowest close in March.

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The S&P 500 gained another 2% during June and has bounced an incredible 39% off of its March low.

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As the S&P 500 rallied 4.5% over the course of May, forward earnings estimates continued to crumble.

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The historically reasonable prices didn’t last long (although they may return) as April’s +13% S&P 500 bounce pushed our downside-to-median estimate from -12% to -24%—right back to where we were at the end of February.

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A nice, round -20% Q1 haircut for the S&P 500 took most of the stuffing out of our downside-to-median estimate.

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The last week of February generated a lot of interest in the vignette.

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