Macro Caution on Exuberant Valuations and Bubble Risks

about 2 months ago

"Let me bore you a little bit with the Schiller P ratio that takes into account 10 year of average earnings. And historically looking, we are just below the dotcom bubble, far higher than the roaring 20s and far far from the nifty50s of the 60s. Because when you look at investing, this is what has made investing so great in the S&P 500. And that's a Schiller P ratio of 15. Schiller P ratio 15 means 7% earnings yield, 3% economic growth for a total of a 10% return on investing that everyone is touting stocks always give that is the 10% but that 10% does not come from a Schiller P ratio above 30. That's the situation."

The speaker offers a macro-level analysis on market valuations using the Schiller P ratio. He compares current levels to historical bubbles, signaling that exuberant valuations may spell reduced future returns and an eventual market correction.