Monday, 9 March 2015

The U.S. Stock Market Risk Indicator, February 2015

The U.S. Stock Market Risk Indicator, which combines insights from the schools of value investing and Austrian economics, increased in January. The current reading remains among the highest ever recorded based on data going back to 1986. The higher the reading, the poorer the outlook for future stock market returns. The indicator therefore continues to signal future stock market returns that will be poor at best. If history is any guide, the indicator flashes red and predicts a significant stock market correction in the not too distant future. 

A rising stock market was the prime driver of the higher reading in February. An increase in consumption relative to savings also helped push the indicator up.