Historically, a combination of a high P/E ratio and historically high profit margins precede a bear market.

Historically, the combination of a high [P/E ratio](https://www.multpl.com/s-p-500-pe-ratio) and historically[ high profit margins ](https://insight.factset.com/sp-500-reporting-highest-net-profit-margin-in-more-than-15-years-1)has been a highly reliable precursor to bear markets and poor long-term equity returns. When both metrics peak simultaneously, it indicates that stock prices are pricing in flawless future growth exactly at the moment when corporate profitability has the least room to improve and the highest vulnerability to mean reversion.