Valuation Models Misery Index & Rule of 20

Stock Market Briefing: Valuation Models

Misery Index & Rule of 20

Yardeni Research, Inc.

August 2, 2023

Dr. Edward Yardeni

516-972-7683 eyardeni@

Mali Quintana

480-664-1333 aquintana@

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Table Of Contents Table Of Contents

Misery Index

1-6

August 2, 2023 / Valuation Models Misery Index & Rule of 20

Yardeni Research, Inc.



Misery Index

Figure 1.

26

MISERY INDEX* & STOCK MARKET CYCLE

24

(percent)

22

26 Latest (6.6)

24

22

20

20

18

18

16

16

14

14

12

12

10

10

8

8

Jun

6

6

4

4



2

2

48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

* Unemployment rate plus yearly percent change in consumer price index. Source: Bureau of Economic Analysis and Bureau of Labor Statistics.

Figure 2.

20

MISERY INDEX COMPONENTS & STOCK MARKET CYCLE

15

10

20

CPI (yearly percent change) (3.0)

15

Unemployment Rate (3.6)

10

5

5

Jun Jun

0

0



-5

-5

48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

Note: Shaded red areas are S&P 500 bear market declines of 20% or more. Yellow areas show bull markets. Source: Bureau of Economic Analysis and Bureau of Labor Statistics.

Page 1 / August 2, 2023 / Valuation Models Misery Index & Rule of 20

Yardeni Research, Inc.



Figure 3.

16

UNEMPLOYMENT RATE (percent, sa)

14

Misery Index

16 Latest (3.6)

14

12

12

10

10

8

8

6

6

4

4

Jun

2

2



0

0

48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

Note: Shaded areas are recessions according to the National Bureau of Economic Research. Source: Bureau of Labor Statistics.

Figure 4.

15

15

UNEMPLOYMENT RATE & BEAR MARKETS IN STOCKS

(percent)

10

10

5

5

Jun



0

0

48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

Note: Shaded red areas denote S&P 500 bear market declines of 20% or more. Yellow areas show bull markets. Source: Bureau of Labor Statistics.

Page 2 / August 2, 2023 / Valuation Models Misery Index & Rule of 20

Yardeni Research, Inc.



Misery Index

Figure 5.

31

31

29

S&P 500 FORWARD P/E RATIO & MISERY INDEX (percent)

29

27

27

25

25

23

Misery Index* (6.6)

23

S&P 500 Forward P/E** (19.8)

21

21

Jul

19

19

17

17

15

15

13

13

11

11

9

9

7

Jun

7

5

5



3

3

78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

* Unemployment rate plus yearly percent change in consumer price index. ** Average monthly S&P 500 stock price index divided by S&P 500 12-month forward consensus expected operating earnings per share.

Note: Shaded red areas denote S&P 500 bear market declines of 20% or more. Yellow areas show bull markets. Source: Bureau of Economic Analysis, Bureau of Labor Statistics, and I/B/E/S data by Refinitiv.

Figure 6.

40

40

MAPE: S&P 500 FORWARD P/E* PLUS MISERY INDEX**

35

35

30 Average = 23.8

25

30

Jun 25

20

20

Latest (25.8)



15

15

78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

* Average monthly S&P 500 stock price index divided by S&P 500 12-month forward consensus expected operating earnings per share. ** Unemployment rate plus yearly percent change in consumer price index.

Note: Bear markets are declines of 20% or more (in red shades). Source: Bureau of Economic Analysis, Bureau of Labor Statistics, and I/B/E/S data by Refinitiv.

Page 3 / August 2, 2023 / Valuation Models Misery Index & Rule of 20

Yardeni Research, Inc.



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