High valuations and rising rates signal potential stock market pullback

The S&P 500 is trading at historically high valuations, with a cyclically-adjusted price-to-earnings ratio of 40.6 in September, a level reached only 26 times since 1957. Historical data suggests that when this metric exceeds 40, the index typically declines by an average of 3% over the following year and 19% over the next two years.

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