A couple of historical data points are painting a worrisome picture for Wall Street.For the better part of President Donald Trump's first term in the White House, the stock market was unstoppable. By the time he left office in January 2021, the ageless Dow Jones Industrial Average (^DJI 0.36%), benchmark S&P 500 (^GSPC 0.43%), and growth-focused Nasdaq Composite (^IXIC 0.94%) had soared by 57%, 70%, and 142%, respectively. It marked one of the highest annualized returns overseen by any president, dating bac ...

But investors can also use margin to purchase stocks and lever their investments. Similar to short-selling, borrowing money from your broker comes with an obligation to pay interest. This borrowed capital has the potential to amplify your gains if correct, but also magnify your losses if your investment thesis is wrong. In other words, it's risky and exposes investors to the possibility of a margin call, affording your broker the right to sell some/all of your holdings at potentially disadvantageous prices ...

Unlike the traditional P/E ratio, which takes into account trailing 12-month earnings per share (EPS) and can be tripped up by U.S. recessions, the Shiller P/E is based on average inflation-adjusted EPS over the previous 10 years. Examining a decade's worth of EPS history ensures this valuation tool doesn't lose its usefulness during economic downturns.Arguably, no historical trend speaks louder than the S&P 500's Shiller Price-to-Earnings (P/E) Ratio, which is also referred to as the cyclically adjusted P/ ...

Core Viewpoint - The quantum computing sector, represented by companies like IonQ, Rigetti Computing, D-Wave Quantum, and Quantum Computing Inc., is facing significant challenges, including ongoing operating losses, cash burn, and unsustainable price-to-sales ratios, indicating a potential bubble in the market [1][3][20]. Quantum Computing Industry - Most analysts believe that quantum computing will take years to solve practical problems more efficiently than classical computers, and further time will be needed for businesses to optimize these technologies for sales and profit [2]. - Despite a remarkable rally of up to 3,080% for quantum computing stocks since October 2024, these companies are still in the early stages of commercializing their products and services [3]. - The arrival of quantum computing is seen as a major trend in 2025, with specialized computers capable of solving complex problems that classical computers cannot handle [4]. Stock Market Trends - The S&P 500 has shown strong performance, climbing by 16% in 2025, marking three consecutive years of gains of 15% or more, a rare occurrence in nearly a century [6][7]. - However, there are growing concerns about historical headwinds that could impact future performance, with predictions that 2026 may be viewed as the "Year of the Bubble" due to multiple potential bubbles in the market [5][20]. Artificial Intelligence Sector - In contrast to quantum computing, the AI sector, led by companies like Nvidia and Palantir Technologies, is experiencing rapid sales growth, indicating a more advanced stage of maturation [8]. - Nvidia's market cap has increased by over $4.1 trillion since early 2023, while Palantir's shares have surged approximately 2,650% [8]. - Despite robust sales of AI hardware, many businesses are still far from optimizing this technology, suggesting a pattern of overestimation in the adoption and utilization of new technologies [9]. Valuation Concerns - The overall stock market is currently considered historically expensive, with the S&P 500's Shiller Price-to-Earnings (P/E) Ratio at 40.66 as of January 8, 2026, making it the second priciest in history [17][18]. - Historical data shows that high Shiller P/E ratios have often preceded significant market declines, indicating that extended valuations may not be sustainable [19].

Core Insights - The S&P 500 finished 2025 with a gain of just over 16%, marking the eighth occurrence since 1926 of three consecutive years of double-digit gains [1][2] - The index's performance in 2025 follows gains of 23% in 2024 and 24% in 2023 [1] - The S&P 500 is currently the second-most expensive in history based on the Shiller P/E ratio, which is just above 40.5 [5][8] Historical Performance Analysis - Historical data shows varied performance in the fourth year following three consecutive years of double-digit gains, with outcomes ranging from negative returns to significant gains [4][6] - Notable fourth-year performances include a decline of 8% in 1929, a gain of 36% in 1945, and a decline of 18% in 2022 [4] - The S&P 500's fourth-year performance has shown no clear correlation, indicating potential volatility [6][7] Valuation Metrics - The Shiller P/E ratio, which adjusts earnings for inflation over the past decade, indicates that the S&P 500 is in rare valuation territory, only surpassed during the dot-com bubble [8] - The current Shiller P/E ratio of 40.5 suggests that the index is historically expensive, raising concerns among investors [8]

Arguably, even more attention is being paid to President Trump's tariffs and their potential impact on the U.S. economy/stock market.Historical precedent makes clear that Shiller P/E multiples above 30 haven't been sustainable over the long term. While the CAPE Ratio isn't a timing tool, it does have a flawless track record of foreshadowing 20% or greater downturns in Wall Street's major stock indexes.For instance, the S&P 500's Shiller Price-to-Earnings (P/E) Ratio, also known as the cyclically adjusted P/ ...

Core Viewpoint - The Shiller P/E ratio indicates that the stock market is currently at a historically high valuation, suggesting a potential for significant declines in the future, particularly under President Trump's administration in 2026 [1][2][3][9]. Valuation Insights - The S&P 500's Shiller P/E ratio has averaged approximately 17.3 since 1871, but as of December 29, it reached 40.59, the second-highest valuation in history [2][3]. - Historical data shows that the Shiller P/E has exceeded 30 on six occasions, with subsequent declines in major indexes ranging from 20% to 89% [8]. Market Performance Under Trump - During Trump's first term, the Dow, S&P 500, and Nasdaq saw increases of 57%, 70%, and 142% respectively, and similar performance was observed in the early months of his second term [5][6][7]. - The current high valuation of the stock market raises concerns about potential turbulence in 2026, as historical correlations suggest increased volatility during midterm election years [10][11]. Historical Context - Historical trends indicate that stock market volatility tends to rise during midterm election years, with average corrections of 17.5% since 1950 [11][12]. - All ten Republican presidents, including Trump, have overseen recessions during their terms, establishing a historical precedent that may suggest economic challenges ahead [13]. Economic Policies Impact - Trump's tariff and trade policies have been linked to declines in employment, productivity, sales, and profits for affected companies, which could contribute to stock market weakness [15][14]. Long-term Investment Perspective - Despite potential short-term downturns, historical data shows that long-term investments in the S&P 500 have consistently yielded positive returns over 20-year periods [22][24].

Although valuations are subjective (i.e., what you find to be pricey might be viewed as a bargain by another investor), one time-tested valuation measure fully supports Fed Chair Powell's commentary that the broader market is historically expensive. This valuation tool is the S&P 500's Shiller Price-to-Earnings (P/E) Ratio, which is also referred to as the cyclically adjusted P/E Ratio, or CAPE Ratio.The point of emphasis is the final six words of Powell's statement: "equity prices are fairly highly valued. ...

Core Viewpoint - The Schwab U.S. Dividend Equity ETF is highlighted as a strong investment option for income- and value-seeking investors, especially in a potentially volatile stock market environment in 2026 [12][19]. Market Overview - The stock market has shown significant gains year-to-date, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite increasing by 13%, 14%, and 18% respectively as of December 17 [1]. - The current stock market is considered the second priciest in history, with concerns about sustainability as it approaches 2026 [2]. Valuation Metrics - The S&P 500's Shiller P/E Ratio, a key valuation metric, is currently at 39.59, which is 129% above its 155-year average of 17.32 [8]. - Historically, when the Shiller P/E has exceeded 30, it has been followed by significant declines in major indices [9][10]. ETF Performance and Strategy - The Schwab U.S. Dividend Equity ETF aims to mirror the total returns of the Dow Jones U.S. Dividend 100 Index and includes 103 established companies [14]. - The ETF offers a yield of approximately 3.8%, significantly higher than the S&P 500's yield of 1.12% [17]. - The average trailing 12-month P/E ratio for the companies in the Schwab U.S. Dividend Equity ETF is 17.18, compared to the S&P 500's 25.63 [18]. Investment Characteristics - The ETF is characterized by low management fees, with a net expense ratio of 0.06%, making it cost-effective for investors [17]. - The focus on high-quality dividend stocks has historically provided better returns and lower volatility compared to non-dividend payers [13].

In December 2024, four New York Federal Reserve economists writing for Liberty Street Economics published a report ("Do Import Tariffs Protect U.S. Firms") that examined the effects of President Trump's China tariffs in 2018-2019 on the stocks and businesses that they impacted. Although stocks exposed to Trump's China tariffs during his first term performed worse on days he announced tariffs, there were far more important findings.On paper, Trump's tariff and trade policy has its positives. But in practical ...