S&P and global economy: future outlook

This is the first in a series of articles in which we would like to share our views on current macroeconomic trends.

Let's start with S&P. The American economy has not been doing well lately, while the American stock market is heavily oversold.

The first chart is the S&P 500 year-to-date P/E ratio.

The value is now above the very important resistance. And historically, it has been followed by a significant decline. The price of the companies is now very high compared to what they earn and usually, a sale follows it.

The second chart is Dow Jones to USA GDP.

The ratio is again above a very important resistance level, which historically is followed by a decline.

Below is an inflation-adjusted Dow Jones index.

Again, as with other charts, we are above a resistance level which is always followed by a massive correction.

All of these metrics are signaling that a massive shock is coming that will cool the market. Stocks are oversold while the overall economic situation is worsening due to inflation. Therefore, the overall forecast for the S&P is negative and now is not a good time for long-term investments. Except for some industries, which will be discussed in the upcoming posts.

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Graphs: macrotrends.net