The US Stock Market’s Critical Test Comes This Month

With the S&P 500 trading more than a third above its 10-year average for expected profits, and high-risk shares leading the benchmark’s charge to new highs, the US stock market looks more vulnerable than ever. The combination of overvaluation, economic vulnerability and the current downward trend in long-term returns should matter to everyone, even investors in it for the long haul. This month poses a critical test for the rally’s sustainability.

Here’s one way to think about where things stand: