Current market analysis reveals that the median price-to-earnings (PE) ratio stands at 21.5, significantly higher than the median PE of 19.6 observed in mid-2022, indicating a state of overvaluation.

Despite the current downturn, the S&P 500 could face an additional decline of 10% to 20%, reflecting the ongoing volatility in the market.

A valuation analysis utilizing a 'Sane PE Multiple' based on mid-2022 earnings suggests that the market is facing considerable downside risk.

If the market were to revert to mid-2022's PE ratio while keeping current net income levels stable, it would imply a necessary pullback of 10% to 15% from current market heights.

This analysis underscores that elevated valuations, combined with historical performance patterns and median metrics, point to the likelihood of imminent market corrections.

As of mid-April 2025, the S&P 500 has already declined about 10% from its peak, which, while relatively mild compared to historical downturns, still raises concerns about potential further declines.

Historically, the S&P 500 has experienced significant declines during periods of economic stress, including a 47% drop during the dot-com bubble and a staggering 55% drop during the Great Financial Crisis.