From The Motley Fool · Matt DiLallo · · 1m
Stock Market Warning Signs
Market flashes warning signs but crash isn't imminent.
In brief
Market flashes warning signs but crash isn't imminent. Market shows multiple warning signs but no crash is imminent; investors should prepare for potential downturns. Originally reported by The Motley Fool.
Market Warning Signs
The stock market flashes multiple warning signs but a crash isn't imminent.
Historical Downdrafts
The market corrects roughly once every 18 months and enters a bear market about once every six years.
Elevated CAPE Ratio
The CAPE ratio is at 40.5, the second-highest reading in 150 years.
Federal Reserve Rate Hikes
The Federal Reserve started raising interest rates for the first time in three years.
Margin Debt Surge
Margin debt surged 49% over the past year, up 45% or more year-over-year.
Outliers and Optionality
The market didn't decline during the 1997 rate-hike cycle despite a small increase.
Preparing for Downturns
Sell lower-conviction holdings to raise cash and build a watch list for potential opportunities.
The key point
Market shows multiple warning signs but no crash is imminent; investors should prepare for potential downturns.
