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Spotting a top in the stock market

Trying to spot a peak or top in stock markets is very difficult – especially ahead of time! In this focus paper we look at some significant pullbacks in the S&P 500 price index since 1987 to see if there is any common pattern or event. This focus also provides some fundamental context to the peaks, giving a summary of the economic background at the time and looking at the cyclically adjusted price-earnings (CAPE) ratio and the excess CAPE yield (ECY) measure which compares PEs with real bond yields.

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