Overvalued Equities Are Ignoring These Seven Recession Indicators

Finance U Public Finance U
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Originally published at: https://peakprosperity.com/finance-u-overvalued-equities-are-ignoring-these-7-recession-indicators/

We’re at a very weird moment in time, with stocks acting like Wily E Coyote strapped to a rocket even as numerous economic indicators are flashing bright red recession warnings.

It’s a familiar, but strange, place for a couple of market pros like myself and Paul Kiker to find ourselves. We’ve been here before, back in 2000 and 2008.

It’s where market euphoria blithely overlooks economic facts. Let me be blunt; with stocks now the most expensive they’ve ever been in all of history, the chance of portfolio losses here is approaching certainty. The alternative is that this time has to be different, and it never is.

Stocks are priced to perfection, which means absolutely nothing can go wrong, or else.

Measured against total market capitalization, the Nasdaq shares are by far the most expensive they’ve ever been.

If measured against 150 years of trendline history, the S&P 500 has never been as extended into nosebleed territory:

If measured against the total value of the GDP – the so-called Warren Buffett indicator – the grand total of all stocks is now apparently ‘worth’ 2.12 times the entirety of US economic output.

When looked at in terms of ‘price-to-sales’, the S&P 500 tech sector is now sporting a 10x(!!) value.

(Source)

These are just somewhat elevated stock prices, but all-time historical record breaking stock valuations.

Flashing Red: Recession Indicators and What Comes Next

Making those stock valuations especially difficult to defend are these 7 recession warning signs that are flashing bright red:

  1. UPS stock price is tumbling. This is the “package indicator” – fewer packages mean fewer purchases, which means less economic activity.
  2. Young adult joblessness is climbing, which it only does during recessions.
  3. Travel services (hotels, airfare, and restaurants) are down three months in a row, a condition last seen in 2008, right before the GFC.
  4. Fast food earnings are down, again a sign that an economically-sensitive portion of the population is struggling.
  5. The Conference Board’s Leading Economic Indicator Index (LEI) is now deeply red, and we again have to go back to 2008 to see a similarly poor reading.
  6. Construction spending is down sharply
  7. Most important of all, the Stripper Indicator is down sharply.

The ticker symbol RICK is for the “Hospitality” company RCI Holdings, which operates a wide network of strip clubs and sports bars. In all seriousness, the RICK indicator is a pretty good leading indicator of recessions. When men cannot afford to indulge their escapist pleasures, you know things are getting serious.

We also discussed the fact that foot traffic in Las Vegas is down sharply, but I think there’s a chance that we’ll have to file that under “self-inflicted wound” caused by typical greedy behavior:

This is why Vegas tourism is downAmerican shows prices for food and drinks by a Vegas pool- Bucket of 24 Coors Light $290.99- 24 High Noon Seltzers $309.99- Basic cocktails like a Bloody Mary $39.99- 12 shots $190Just look at this good and drink menu, the prices are… pic.twitter.com/ZAh3XKRCzb

— Wall Street Apes (@WallStreetApes) August 14, 2025

So what comes next? Well, stocks are not priced for a recession. At all. If these 7 recession indicators are accurate, and a recession is (in all likelihood) already underway, then a big fat stock market correction is what happens next.

Having a balanced risk-managed approach is vital during such times to preserve one’s investment wealth. To arrange a meeting with Paul’s firm to discuss your financial plans and goals along with a risk-managed portfolio approach, please visit Peak Financial Investing and fill out the simple contact form.

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One more bright red indicator is this largest-ever gap between the projected earnings of the S&P 500 vs. air and logistics companies.

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As you can easily imagine, there has been something of a tight relationship between the two over time. After all, shipping things to and fro is a big part of what we call ‘the economy.’

If you peer more carefully, you’ll note that the decline in air freight earnings has preceded the decline in the broader S&P earnings.

So they are something of a leading indicator and are currently approaching a level not seen since 2019.

Mind the gap!

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A local indicator for us is that traffic and sales are way down at our local farmers and art market. People aren’t buying local, more highly-priced produce or “luxury” arts or crafts items.

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Isn’t it weird, how the food stuffs that have exploded the most in price are the very ones the WEF said a long time ago they’d rather you not eat anymore?

https://x.com/1CoastalJournal/status/1955974442846445971

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I am now hearing more and more stories to the effect of, “where are all the people?”

It’s weird, but when recessions happen it’s like a silent dog whistle is blown that tells people to stay home and not buy or spend.

And then that feeds on itself; “Hey, this place is weirdly quiet, i think maybe I’ll just not buy this thingy here…”

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I’m an electrician in Florida on the west coast. Vacation rentals are mostly empty. Maybe from last years storms.

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As huge capital in stock market and investments is directed at AI and datacenters, what indicators would suggest that stuff is going down? Electric use ?
(joke police would monitor house high electric and water use to spot shady activity)
Afterall DCs are almost productless once in operation. Water and electric used mostly.

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Probably nothing:

https://x.com/LizAnnSonders/status/1956320324150014106

Also probably nothing:

https://x.com/JeffWeniger/status/1956096987855495400

Next, living in blue states is both a choice and an expensive choice:

https://x.com/KobeissiLetter/status/1956132980679958563

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Charlie Brown has grown a beard. “Good Grief!”

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Maybe: because i live in middle TN, go to a Bible based independent church and more importantly spend a lot of time in my gardens BUT i not see this doom and gloom. I am suspicious enough already do i just need to look harder?
Since the 2008 GFC the world was supposed to come to an end- but up and to the right baby!! Rock on.

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Concerned where all those Trump Trillions are going? The Big Ten? These trillions do not exist. President Trump made them up. The President’s math is terrible, or he’s rigging the numbers, too.

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I’ve got one for you. Medicare just told me they are dropping my Part B and I will be paying the premiums beginning in September. Medicare gives the reason as my income is too high. But nothing changed between 2024 and 2025.

I got the same COLA as everyone else – 2-percent. In return, New York State (who administers Medicare) is garnishing over 6.2-percent of my Social Security.

So, what happens in 2026 when NYS comes back and says my income is again too high? Are they going to garnish another 6-percent in my Social Security?

This is government grift. Theft.

This has been going on since 2022. Three (3) years in a row.

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There have been markets that skyrocketed during weak economies but were not really overvalued. Ex: Weimar Germany, Venezuela, Turkey, a number of times in Argentina. What they all had in come was not an overvalued market, but a collapsing currency. In fact, while in nominal terms prices were skyrocketing, in real terms they were actually falling!

Is this what we are seeing throughout the western markets, economies, and fiat currencies? Are the markets overvalues or just the first signs and foreshadowing of a collapsing currency? Are we in Mises’s crack up boom?

Steve

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image

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Some economic commentators I follow are wondering the same thing. Hard to say at present.

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Just be thankful I haven’t shaved my head. Yet.

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I think one’s experience depended heavily on which seats one had during the performance:

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I do believe that you can 100% count on Kathy and her minions finding ways of blaming their victims for being victimized, and tripling down of re-re-victimizing the victims as a means of feeling better about themselves.

If only there had been some sort of a warning sign that the NYState “leadership” enjoyed preying on the weak and defenseless?

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i’ve often wondered if the area above the curve matches the area under the curve. As parted of my MBA Finance class, I did a paper with peak regression vs low regression. It was interesting, as every time the market fell, it always fell to the low regression curve point.

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@chris
I am terrible at fully communicating in a quick post. Maybe the financial difficulty is under the service and/or so far not as bad in middle TN
I do not doubt the charts and have seen 100’s in the last 15+ years
Just frustrated nothing seems to change: up and to the right, no arrests no accountability
Passively in S&P500 results in great returns. While those of us who are awake and believe with facts what we have is a casino controlled by the ruling class just wait.
Wish it were not so.