While Citi's earnings-yield gap model indicates stocks are over-valued currently, their proprietary panic/euphoria model has now been in "euphoria" mode for six straight weeks. Having risen further into extremes, Tobias Levkovich notes that readings at this level indicate the market may retreat with an 83% historical probability of losses in the next 12 months.
The Earnings-yield gap sees stocks modestly over-valued...
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But investors are "euphoric" - will its be 1987 and 2008's collapse or 1999's meltup before collapse?
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Charts: Citi