The S&P 500 Index is back to its level from last Thursday after a brief dip on Friday. However, it will take a significant decline to create a lower low, as seen in April 2020 when the index fell to 4,983.
Analysts have been warning of a potential market correction. Carter Worth, a stock charting expert, analyzed the S&P 500’s price-to-sales ratio over a 30-year timeframe and found that if the current trend line continues, the index could fall by 7% or more, taking it to levels seen in previous downturns.
Worth compared the index’s price-to-sales ratio with its past peaks. If the market falls to a 2.4x multiple, as seen during the tech bubble in 2001, it would decline by 14%. Conversely, if it falls to a 2.2x multiple, as seen during the financial crisis in 2009, it could drop by 21%.
Fundamental analysis also points to potential concerns. John Butters, a senior earnings analyst at FactSet, notes that the S&P 500’s price-to-earnings (P/E) ratio is above its 10-year average but below its 5-year average. With earnings declining over the past nine weeks, it may not be unreasonable for the market’s multiple to adjust downward.
As of April 11, the index’s P/E ratio stood at 19.6x, which is close to its current 30-day moving average of 18.3x and above its 5-year average of 19.9x. Experts warn that a decline in earnings or uncertainty over tariffs could lead to a decrease in the market’s multiple, potentially taking the index lower.
Source: https://www.forbes.com/sites/chuckjones/2025/04/17/charts-show-the-sp-500-at-risk-of-falling-to-4200