U.S. Stock Valuations Reach New Highs
Clearly this is far too high, so it is clear that investors are pricing in a sharp rebound in earnings. But the only way that can happen is if the downturn ends soon, which I find unlikely. Meaning that U.S. stocks are overvalued from a fundamental point of view, both compared to the past and compared to other stock markets. A important reason for this is that U.S. interest rates are so low compared to both the past and compared to other countries, meaning that investors who want to hold dollar assets see few alternatives to stocks.