From a valuation standpoint, we estimate that the S&P 500 Index would have to fall to the 1000 level to bring prospective 10 - year
nominal total returns toward their historical norm of about 10 % annually.
With the S&P 500 within about 8 % of its highest level in history, with historically reliable valuation measures at obscene levels, implying near - zero 10 - 12 year S&P 500
nominal total returns; with an extended period of extreme overvalued, overbought, overbullish conditions replaced by deterioration in market internals that signal a clear shift
toward risk - aversion among investors; with credit spreads on low - grade debt blowing out to multi-year highs; and with leading economic measures deteriorating rapidly, we continue to classify market conditions within the most hostile
return / risk profile we identify — a classification that has been observed in only about 9 % of history.