- Stocks are historically extended by many measures.
- This has led to a chorus of investors calling for a crash.
- We’ve compiled 9 indicators that show the breadth of extremity in market conditions.
- See more stories on Insider’s business page.
Investors seem to be walking on egg shells these days.
After a historic recovery from the fastest bear market in history — the S&P 500 is up more than 90% since the March 2020 lows — the tone on Wall Street appears to have suddenly shifted from unabashedly bullish to exceedingly cautious.
This has been accentuated by notoriously bearish investors — perhaps most notably Michael Burry, whose bet against the housing market ahead of the Global Financial Crisis was portrayed in the film “The Big Short” — calling for a crash in stocks ahead.
Threats to stocks abound. The market dropped about 1% on Thursday due to fears of the Delta variant of COVID-19 currently spreading in areas of the US. Inflation has risen more than expected in each of the last two months, and could very well do so again when June’s consumer price index is released on July 13. This could send bond yields soaring, potentially triggering an exit from stocks. And the Federal Reserve could taper asset purchases earlier than expected.
But it’s precisely because of their extraordinary recovery that stocks now sit in such a precarious position, vulnerable to a slew threats with their valuations inflated.
So, are stocks really due for a crash? It’s impossible to know for certain. But some indicators don’t paint a pretty picture.
While indicators are not the entire story and the market is a complicated beast, we’ve compiled below a list of measures them that show just how extreme some conditions in the market are at the moment — and that signal stocks could be due to take a break from their steady advance.
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