Issue 1 · Late October 2026
Stock markets in the US, China, Japan, the euro area, India, Germany, the UK, Taiwan and South Korea, plus world and emerging-market composites. Each number compares the indicator only with its own past: the share of past months it is higher than; 50 is normal. For prices and rates, what is compared is how far the reading is from its own 10-year average: 100 means the furthest from that average, not necessarily a record price or rate.
This issue
Combined, the 11 indicators in this category stand at 83 hot.
The others: Japan stocks 89 (hot), Euro-area stocks 83 (hot), German stocks 72 (warm), World stocks 72 (warm), China stocks 68 (warm), UK stocks 58 (neutral), Emerging markets 53 (neutral) and India stocks 34 (cool).
Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.
Where it stands now
The category combined
Each month we take the median of the indicators’ positions, going back to 1979. Higher = share prices further above their own 10-year average.
coldcoolneutralwarmhotHatched = earlier periods that were also hot
US stocks after it began, cumulative1 yr2 yr3 yr
For each period, the changes 1, 2 and 3 years after it began are cumulative and measured from its first month; “What happened next” is measured from every hot month, so the two give different numbers. The events named beside each period are major events of that time, not necessarily related to the readings here.
Sample too small to draw conclusions (past hot months: 97; market episodes: 2).
“US stocks” means the S&P 500 price index compiled by Professor Shiller (monthly average, excluding dividends).
1979–2021: average yearly change in US stocks over the next 5 years
There is no clear relationship between hot or cold and what came next. The gaps between the bars are not consistent across months (rank correlation below 0.25); this is a record of the past, not a forecast.
What it is linked to
Taiwan export orderstoTaiwan stocksCommon explanation: Knock-on · same direction
Export orders and share prices are both leading indicators, turning before the economy does
This issue: Taiwan export orders at 99 (hot), Taiwan stocks at 99 (hot) — both above normal, in line with the common explanation.
Supported by the dataAgreement +0.59 · in step in 15 of 15 5-year periods
US stockstoWorld stocksCommon explanation: Ripple · same direction
The US is the world’s largest stock market, and US corrections often spill over to other markets; in a crisis, markets everywhere fall together
This issue: US stocks at 94 (hot), World stocks at 72 (warm) — both above normal, in line with the common explanation.
Supported by the dataAgreement +0.77 · in step in 45 of 45 5-year periods
US stockstoTaiwan stocksCommon explanation: Ripple · same direction
Electronics and semiconductors make up a large share of Taiwan’s market, which moves closely with US stocks
This issue: US stocks at 94 (hot), Taiwan stocks at 99 (hot) — both above normal, in line with the common explanation.
Supported by the dataAgreement +0.62 · in step in 14 of 15 5-year periods
US dollartoEmerging marketsCommon explanation: Ripple · opposite direction
A strong dollar makes emerging economies’ dollar debts heavier, drives money out and tightens financial conditions
This issue: US dollar at 45 (neutral), Emerging markets at 53 (neutral) — at least one is in the neutral range (40–60), so we make no call this issue.
Supported by the dataAgreement +0.56 · in step in 5 of 5 5-year periods
Financial stresstoWorld stocksCommon explanation: Ripple · opposite direction
In a panic, the prices of risky assets of all kinds tend to fall together
This issue: Financial stress at 12 (cold), World stocks at 72 (warm) — Financial stress below normal, World stocks above normal, in line with the common explanation (this is an inverse link).
Supported by the dataAgreement +0.48 · in step in 28 of 32 5-year periods
USD/CNYtoChina stocksCommon explanation: Ripple · renminbi weakens, China stocks fall
Sharp swings in Chinese stocks can fuel capital outflows, and outflows put pressure on the renminbi (the source discusses 2015–16)
This issue: USD/CNY at 31 (cool), China stocks at 68 (warm) — USD/CNY below normal, China stocks above normal, in line with the common explanation (this is an inverse link).
Supported by the dataAgreement +0.78 · in step in 3 of 3 5-year periods
OFR stresstoWorld stocksCommon explanation: Ripple · opposite direction
When financial stress and volatility jump, funds that control risk by volatility lower their stock holdings at the same time, putting pressure on stock markets
This issue: OFR stress at 36 (cool), World stocks at 72 (warm) — OFR stress below normal, World stocks above normal, in line with the common explanation (this is an inverse link).
Supported by the dataAgreement +0.50 · in step in 12 of 12 5-year periods
USD/JPYtoWorld stocksCommon explanation: Ripple · a sharp rise in the yen weighs on world stocks
Positions funded in yen are forced to unwind together, and stock markets around the world come under pressure at the same time
This issue: USD/JPY at 94 (hot), World stocks at 72 (warm) — both above normal, in line with the common explanation.
Weak or inconsistentAgreement +0.13 · in step in 18 of 31 5-year periods