These Stock Market Indicators Are Sounding the Alarm. Here’s What Investors Should Do Right Now.
Stock prices may be rising, but many investors have mixed feelings about the market.
About 40 percent of investors are still optimistic about the next six months, while about 30 percent are worried that stock prices will fall in the coming months, according to the American Association of Individual Investors’ latest weekly survey.
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No one can predict the future, especially the short term. But there are a few warning signs investors may want to watch out for right now, as well as some steps to prepare for a potential crisis.
There’s no way to predict what the market will do this year, but sometimes it can be useful to use historical context to get an idea of what’s happened in similar situations. There are two stock market benchmarks that are not great for investors.
First, the S&P 500 Shiller CAPE (cyclically adjusted price-to-earnings) ratio. This measure is based on average inflation-adjusted earnings over the last 10 years and is typically S&P 500 is more or less valuable. The higher the number, the more valuable the index may be.
Historically the average Shiller CAPE ratio has been around 17. However, as of February 2026, this measurement is approaching 40. This is the second highest value in history, next to the peak before the dot-com bubble in the early 2000s.
The second metric to watch is the Buffett indicator, which measures the ratio of US gross domestic product (GDP) to the total market value of US stocks. It was popularized by Warren Buffett as described in a 2001 interview. Luck magazine described how he used the measure to accurately predict the bursting of the dot-com bubble.
“For me, the message of this chart is that if the percentage relationship drops to 70% or 80%, buying the stock will probably do very well for you,” he said. “If the rate is approaching 200%, as it was in 1999 and part of 2000, you’re playing with fire.”
As of the moment of this writing, the Buffett indicator stands at 221%. The last time the metric approached 200% was in November 2021, just before stocks began to rally. bear market This will take almost a year.
No stock market measure is perfect because past performance does not predict future returns. Even if there are strong historical patterns that indicate a downturn is coming, this does not necessarily mean a crash. recessionor a bear market is approaching.
