9 of the stock market’s 10 most-watched valuation indicators are now in ‘sell’ territory

MarketWatch

by Mark Hulbert

February 24, 2026

AI-Generated Deep Dive Summary

The stock market’s valuation indicators are sending a clear warning signal: nine out of ten of the most closely watched metrics now indicate "sell." According to a new study by Javier Estrada, a professor of finance at IBES Business School in Barcelona, Spain, these extreme readings suggest stretched valuations and potentially bearish outcomes for stocks. The research emphasizes that investors should focus on the extremes of valuation ratios rather than their mid-range values, as this provides a clearer picture of market value and future returns. The study highlights that when valuation indicators reach either historically high or low levels, they tend to signal turning points in the market. For instance, metrics like the Shiller CAPE ratio, P/E ratio, and others are currently at elevated levels, suggesting that stocks may be overvalued. This aligns with historical patterns where such extremes have often preceded significant market corrections. Estrada’s research underscores the importance of paying attention to these signals, as they can help investors make more informed decisions about their portfolios. The implications for investors are profound. With nine out of ten indicators pointing toward a "sell" signal, the study suggests that markets may be due for a correction. This is particularly relevant given the current market environment, where stretched valuations and heightened investor optimism could lead to downside risks. For those managing stock portfolios, this research serves as a reminder to consider reallocating assets or taking defensive measures to mitigate potential losses. In summary, the study’s findings provide valuable insights into the current state of the stock market and its likely trajectory. By focusing on extreme valuation readings, investors can better navigate market volatility and make decisions that align with long-term financial goals. This research not only adds depth to our understanding of market behavior but also serves as a practical tool for investors seeking to optimize their strategies in an ever-changing financial landscape.

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Originally published on MarketWatch on 2/24/2026