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Why a 60-65% Market Loss Would Be 

Run-Of-The-Mill

Likewise, valuations for nearly every decile of stocks presently exceed those observed at the 2000 market peak. As we’ll see below, the extreme valuation of capitalization-weighted indices like the S&P 500 at the 2000 peak was driven by single decile of stocks, largely represented by large-cap technology stocks that collapsed by -83% during the subsequent bear market. At present, every decile of stocks, without exception, is sufficiently overvalued to allow market losses on the order of -59% to -71%, without even breaching their respective valuation norms. 

It’s worth remembering that except for the 2000-2002 bear market, which ended at valuations that were still about 25% above historical norms, every other bear market decline in history, including the 2007-2009 decline, has taken reliable valuation measures to historical norms that presently stand between -60% and -65% below present market levels.

 DYI