At open, Dow -0.19%, S&P 500 -0.15%, Nasdaq -0.14%

At open, Dow -0.19%, S&P 500 -0.15%, Nasdaq -0.14%

As the markets opened on July 2, 2025, the Dow Jones Industrial Average, S&P 500, and Nasdaq experienced minor declines, reflecting a cautious investor sentiment. This article explores the current market valuation models and the upcoming IPO lock-in expirations, providing a comprehensive overview of key financial indicators.

Market Valuation Models

Several valuation models indicate that the stock market is currently overvalued. The Buffett Indicator, which compares the total value of the US stock market to GDP, is strongly overvalued [1]. Similarly, the Price/Earnings (PE) Ratio Model, Price/Sales Ratio Model, and Mean Reversion Model also suggest overvaluation [1]. The Interest Rate Model indicates that the market is overvalued due to low interest rates [1]. However, the Earnings Yield Gap Model shows that the S&P 500 is fairly valued compared to US Treasury bonds [1].

Recession Indicator Models

The Yield Curve Model and Sahm Rule both indicate normal recession risk, suggesting that the US economy is at risk of entering a recession [1]. The State Coincidence Indicator also points to a potential recession, with an increasing number of states experiencing economic decline [1].

Market Sentiment Models

Market sentiment models provide mixed signals. The Margin Debt model shows neutral sentiment, indicating neither bullish nor bearish investor behavior [1]. The Junk Bond Spreads model also shows neutral sentiment, with investors requiring high compensation for credit risk [1]. The VIX Fear Index suggests neutral sentiment, reflecting market stability and bullish sentiments [1]. However, the Economic Policy Uncertainty index indicates very pessimistic sentiment, with high uncertainty over future economic policy [1].

IPO Lock-In Expirations

From August 25 to November 27, 2025, 57 companies will unlock shares valued at USD 20 billion [2]. This includes significant releases from companies such as Ather Energy and Borana Weaves. The lock-ins will occur in various phases, with 1-month, 3-month, and 6-month lock-in expirations. This period is expected to be busy for IPO lock-in expirations, with potential implications for stock market volatility.

Conclusion

The current market valuation models suggest that the stock market is overvalued, while recession indicator models indicate a potential recession risk. Market sentiment models provide mixed signals, with high economic policy uncertainty adding to investor caution. The upcoming IPO lock-in expirations may contribute to market volatility. Investors should remain vigilant and consider these indicators when making investment decisions.

References

[1] https://www.currentmarketvaluation.com/
[2] https://www.livemint.com/market/ipo/ipo-lock-in-of-57-companies-to-expire-in-3-months-20-billion-shares-to-flood-stock-market/amp-11756112289663.html