Stock Market's Valuation Problem Just Got Worse

Fed Chair Powell called it months ago: stocks are overpriced. But here’s the thing — his warning looks even scarier now.

The numbers tell the story:

• S&P 500 trading at 21.5x forward earnings (still way above the 10-year average of 18.7x)
• Consumer sentiment hit its second-lowest reading ever in November (51 out of 100)
• Jobs market is basically limping: only 39,000 jobs/month average from May-Sept (lowest since 2010, excluding pandemic)
• Inflation expectations jumped to 4.5% year-ahead, up from 3% in September

What changed? Trump’s tariffs.

Since the 10% baseline tariff kicked in April, we’ve watched:

• CPI climb from 2.3% → 3%
• Monthly job additions crater from 123k → 39k
• Unemployment creep up to 4.4% (4-year high)

Wall Street is still calling for a 20% S&P 500 rally over the next 12 months. Maybe they’re right. But consumer pessimism is at decade highs, and when people stop spending — that’s when earnings estimates get slashed.

Keynes said markets can stay irrational longer than you can stay solvent. True. But investor bullish sentiment already dropped from 45.9% to 32.6% recently. The momentum is shifting.

If tariff fallout hits forward earnings, this bull run could be done. Time to think about building cash, not just chasing stocks.