This Time-Tested Metric Has Foreshadowed Virtually Every Major Stock Market Downturn This Century -- and It's Sounding a Warning Right Now
Yahoo Finance ·
Roughly one month ago, the ageless Dow Jones Industrial Average ( ^DJI +1.14% ) , benchmark S&P 500 ( ^GSPC +0.00% ) , and growth-stock-powered Nasdaq Composite ( ^IXIC 0.80% ) all blasted to record highs, driven by artificial intelligence euphoria and better-than-expected corporate earnings. But this historic Wall Street rally may not be as strong as the Dow, S&P 500, and Nasdaq indicate. While historical precedent can't concretely guarantee what's to come, the past can act as a teaching tool for investors more often than not. One time-tested metric, reported monthly, has had an uncanny ability to foreshadow significant stock market downturns since the start of this century -- and for the first time in roughly five years, it's sounding an unmistakable warning. Although stock valuations are historically high , and the S&P 500's Shiller Price-to-Earnings Ratio has a phenomenal track record of forecasting stock market corrections and bear markets, perhaps no metric is more terrifying for investors than margin debt.
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