see
good video for you to watch:
youtu.be/xFm4DEO1vxQ?t=129
2:08
The fundamentals are what is going to drive ultimately where we go; and it really comes down to a question of where do S&P500 earnings end up, and really more importantly where do these P/E ratios go, and when you look at where the P/E ratio is currently at 21.6 for 2025 it's still a very high multiple, and earnings estimates while they've come down some they are still kind of elevated and seem somewhat unrealistic for the environment we're in. When we take a deeper dive and look at where earnings are historically, where valuations are historically, historically, the S&P500 trades at a median of 15.2, currently, even with the latest decline, index is still 5 full points above the median; 15x 265 you're looking at an S&P500 that trades at 4,000, so there's a big valuation gap where it's priced and where historically price is; now when you think about the market overall and the uncertainty in it, typically you expect market multiples to contract because people pull back on risk and delever their portfolios...Margin compression [assumptions] 224 x 15 = 3361 S&P500...room for the earnings # itself to come down itself and for the multiple to contract...let's say that it went to 18x, you're still talking about an S&P500 at 4500...what I'm trying to say is that given the amount of uncertainty, what's going on in the market, while it's nice to look at the charts, understanding the fundamentals in this case is very valuable
I don't think /smg/ understands how extremely overvalued markets were. People hear "21x multiple" and shrug it off, not realizing that if earnings are $265, and the multiple shrinks from 21x to 15x --> 265 x 21 = 5565 --> 265 x 15 = 3975 -- this is a massive difference, just based upon the multiple on earnings people are willing to pay, not even factoring in the decline in earnings
protip: in 2008 S&P500 earnings fell by 56.8%