All bull markets come to an end. The key for investors then is to get out before it happens. What exactly should they be looking for?
Inflation has killed almost every bull market in Cramer’s long career on Wall Street. That’s because inflation forces the Federal Reserve to tighten interest rates, which is the exact opposite of what investors want. They usually assume that rising rates will hurt earnings and make yield-based securities more attractive than stocks. As a result, money pours out of the market.
The second bull killer is, not just overvaluation, but “super extreme valuations,” Cramer said. Stocks were so expensive in 1987 and 2000 that earnings per share took a back seat to derivative measures such as sales per share, takeover values per share and outlier-year earnings.