The S&P 500 hasn’t been this oversold and overvalued at the same time in over a quarter century

The drop in the S&P 500 since February 19 has been steep and sudden.

Markets that fall hard, fast tend to end up in a so-called “oversold” position — that is, everyone’s dumped so much, so quickly, seemingly leaving nowhere to go but up (at least for a little relief rally).

However, oversold markets are also often cheap. And the S&P 500’s 12-month forward price-to-earnings ratio, which at 18.3x is in the 74th percentile relative to history since January 1990, is down from its 2025 peak of 22.4x but does not scream cheap.

Just how rare is this mixture of seemingly overvalued and oversold?

To measure oversold, let’s go with how far the S&P 500 is trading below its 50-day moving average. By that gauge, the S&P 500 is completely washed out, ending last week 13.2% below that technical measure of short-term trend. Going back to January 1990, less than 0.7% of the time has the S&P 500 traded lower relative to its 50-day moving average than it is now.

Over this time frame, there’s only been one day where the S&P 500 was more richly valued, based on its forward price-to-earnings ratio, and further below its 50-day moving average than it is now: August 31, 1998. That’s the week Russia defaulted on debt and devalued its currency, events that accelerated the demise of Long-Term Capital Management.

One sentence from Bloomberg’s daily wrap that day reads, “Dell fell 18 3/4 to 100, Microsoft lost 9 5/16 to 95 15/16, and Intel dropped 5 13/16 to 71 3/16.”

So, the benchmark US stock index hasn’t been this oversold and this expensive simultaneously since we were quoting stock prices in fractions.