The American stock market seems to be at a point where investors feel increasingly uncomfortable. The valuations of large listed companies, measured by foundations such as profit and turnover, reach levels that are reminiscent of the peak of the Dotcom bubble. But what does this mean for the market?
Investors are starting to get nervous
Several recent surveys among institutional investors show that the worries about inflated valuations are increasing. According to the S&P Global Investment Manager Index, the risk appetite has fallen back to one of the lowest levels since the start of the measurement in 2020. The monthly study by Bank of America among fund managers also shows a similar picture: 89% of the respondents find US shares overvalued, the highest percentage since April 2001.
Private investors are also becoming increasingly reluctant. A poll by the American Association of Individual Investors shows that 47% of the respondents expect the stock market to fall over the next six months – a pessimism that we have not seen since the end of 2023.
Highly appreciated, but not without reason
The worries about the high ratings are not without the basis. The Cyclically Corrected price-gain ratio (CAPE)developed by Nobel Prize winner Robert Shillerrecently got up 38,5-A level that has hardly occurred since the Dotcom bubble.
In addition, the Forward Price-to-Sales ratio of the S&P 500 with 3.03 ended up at a level that we saw for the last time in 2000. The price-profit ratio based on expected profits is also 22 above the 10-year average of 19.
Yet some analysts emphasize that high ratings in themselves are not a guarantee for a decline in stock market. Many companies are fundamentally good, with strong profit margins and revenue growth. The recent quarterly figures show that companies are able to maintain their results.
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Source: https://newsbit.nl/amerikaanse-aandelenmarkt-onder-druk-beleggers-vrezen-herhaling-van-de-dotcom-bubbel/
