Stock Market Crash Indicators
Market fragility scored from six stress and valuation indicators. This is an uncalibrated score, not the chance of a drawdown over a specified horizon. For economic-recession risk, see Recession Risk.
Buffett indicator. Stock market value is the Federal Reserve’s quarterly market value of US nonfinancial corporate stock (Z.1 Financial Accounts, via FRED), divided by nominal GDP (BEA, via FRED), from 1947. The latest quarter is carried to today with the daily move of the Wilshire 5000 total market index, and GDP is the latest reported quarter. The Fed’s measure leaves out banks and insurers, so readings sit a little below total-market versions; every point in the history is measured the same way.
About this tool
Stock market crash indicators rarely agree, so this page combines six of them into one live gauge of drawdown risk: high-yield credit spreads, the yield curve, financial conditions, CAPE, the equity yield spread and the dividend yield. Next to it, a bubble meter scores six classic bubble questions against the market's own history, from valuations to leveraged buying and new buyers.
The honest science: valuations predict decade-long returns well and next-year crashes barely at all, while stress signals move too fast to give much warning. So the gauge is best read as measuring how fragile the market is, not when it breaks. Expensive plus leveraged plus euphoric means thinner ice, whatever the date of the crack.
Crash Risk sits beside two related tools: Recession Risk shows a heuristic recession risk score, and US Economic Regime shows which growth and inflation backdrop the economy is in.
Can stock market crashes be predicted?
Not with useful timing, and this page does not pretend otherwise. What history does support is measuring conditions: crashes from expensive, euphoric, leveraged markets have been deeper and more frequent than crashes from cheap, hated ones.
What are the best stock market crash indicators?
Credit spreads and financial conditions tend to move first, because lenders get nervous before stock buyers do. Valuation measures such as CAPE matter more for how deep a fall can go than for when it starts. The scorecard on this page shows each one with the hit rate it has earned.
What is the Shiller PE (CAPE) today?
The CAPE tile in the scorecard shows the latest reading and opens a chart of its full history when clicked. CAPE, created by Robert Shiller, divides price by 10 years of inflation-adjusted earnings, which smooths the business cycle out of the ordinary P/E.
What is the Buffett indicator?
It is the total value of the US stock market divided by the size of the economy (GDP), a measure Warren Buffett once called a good single gauge of valuation. The Buffett indicator card at the bottom of this page tracks it live against every quarter since 1947. The drawdown gauge itself scores valuation through CAPE, the equity yield spread and the dividend yield, which have longer histories.
Is the stock market in a bubble?
The bubble meter answers that as six questions: are prices high, is growth priced in, are new buyers flooding in, is sentiment bullish, is buying leveraged, and is business investment at boom levels. Each is scored against its own history, so a high reading means today looks more bubbly than most of the past.
What is margin debt and why watch it?
Money borrowed against portfolios to buy more securities. Rapid margin growth marks euphoric episodes, and forced selling of margined positions is a classic accelerant that turns declines into cascades.