ODA Model Perfectly Predicts S&P 500 Declines of 20% or Greater

Paul R. Yarnold. Ph.D.

Optimal Data Analysis, LLC

The Shiller price-to-earnings (P/E) ratio assesses mean inflation-adjusted earnings in the prior decade.1 Five times over the past 150 years this index consistently exceeded 30 during a bull market run. Two times were during the Great Depression and the “dot-com” bubble, and both resulted in record declines in equity prices. Two other times occurred in the past three years and ended in declines of 20% to 34% in the S&P 500 index. The fifth time began on February 3 of 2021, with the Shiller P/E ratio for the S&P 500 approaching 35.

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