Stock Market Cafe
  • Home
  • Trading News
  • Email Whitelisting
  • Privacy Policy
  • Home
  • Trading News
  • Email Whitelisting
  • Privacy Policy
No Result
View All Result
Stock Market Cafe
No Result
View All Result
Home Trading News

Doubting that we could be in a stock-market bubble? Here’s the chart you need to see.

by
November 14, 2021
in Trading News
0
0
SHARES
0
VIEWS
Share on FacebookShare on Twitter

A shocking week on the inflation front has left a dent in stocks, with major indexes set to deliver 1%-plus losses across the board. That’s even as some Wall Street strategists see little blocking further stock gains or that frequent year-end melt-up.

Yet the worry festers, such as for Nicolai Tangen, the manager of Norways’ $1.4 trillion sovereign-wealth fund, the biggest money pot in the world.

RELATED POSTS

RBC downgrades Boston Beer, cuts price target on waning popularity of Truly hard seltzer

Top SoftBank exec steps back from role at Vision Fund as pressure mounts on investments

“We’re looking at the degree of euphoria. With markets really panicky last year, we have entered a very euphoric phase, and we just need to consistently gauge the levels of euphoria,” Tangen said in a recent interview with Devin Banerjee, editor at large, business and finance for LinkedIn.

“And then, of course, the real threat is inflation. If inflation really takes off, that’s going to be bad news both for our bond portfolio and for the equity portfolio. So, that’s where we have the laser focus,” added Tangen.

It’s a reminder that what some see as heady times for stocks aren’t going unnoticed.

That brings us to our call of the day from Michael O’Rourke, chief market strategist at JonesTrading, who falls into that camp with his latest note entitled “In case there are bubble doubts.”

He writes: “Since the U.S. financial markets have achieved new levels of insanity, we want to make sure we document this moment in time for posterity’s sake. Apparently, we have not learned anything from the Equity, Housing and Credit bubbles that occurred between 1999 and 2008.

“It can’t be any clearer than the fact that the S&P 500’s market capitalization is 177% of U.S. GDP,” adds O’Rourke, who provides this chart:

JonesTrading/Bloomberg

During the 2000 tech bubble, the S&P 500’s market capitalization peaked at 121% of nominal gross domestic product, he says.

“That should paint a stark picture as to how expensive today’s market is relative to the last generational equity bubble,” says O’Rourke, who adds that the current level is also double the average reading of the past three decades and triple the valuation where the S&P 500 bottomed during the 2008-09 financial crisis.

“Even with the greater inflationary bump to Nominal GDP, it would need to grow at 8% for a decade to return to the historic market cap to GDP average,” he says.

JonesTrading/Bloomberg

“The $3 trillion in crypto (whose only purpose appears to be speculation) is a
clear illustration of an environment that knows no fear. Nonetheless, we are
among the few who fear a 50% S&P 500 valuation drop that would bring the
index’s market capitalization back in line with its average historic relationship
to GDP,” he says.

O’Rourke reminds of us a “painful” 80% decline for the Nasdaq Composite between March 2000 and October 2002. “Just think, the broad tape is 50% more expensive today than March 2000,” he says.

Back then, Amazon
AMZN,
+1.52%

was a top internet company and highly regarded stock, but shares still slumped 95% between December 1999 and September 2001, he says.

The strategist goes on to point the finger at the Federal Reserve and other central banks for propping up markets. “Today, the world is no better than the one two decades ago, and it is arguably worse. It is simply that these extra trillions of dollars having entered the economy in a short period of time provide the pretense of a special time meriting unsustainable valuations,” he says.

Also read: ‘Risks of a market bubble are growing,’ warns Morgan Stanley

The buzz

Johnson & Johnson
JNJ,
+1.20%

shares are climbing, after the multinational said it is splitting up into two publicly traded companies.

Lordstown Motors
RIDE,
-17.56%

stock is tumbling, after the electric-vehicle maker reported a narrower quarterly loss, but pushed out its pickup truck production.

Rivian Automotive
RIVN,
+5.66%

will need “high production and break-even cash flow” to make it, Tesla
TSLA,
-2.83%

CEO Elon Musk said on Twitter, following the rival electric auto maker’s blockbuster stock debut this week. Rivian shares are up in premarket. Musk, meanwhile, continued to sell shares, shedding another 634,000 shares on Thursday.

AMC Entertainment’s CEO Adam Aron tweeted that as promised, the movie-theater chain is now accepting bitcoin and other cryptocurrencies, and Dogecoin
DOGEUSD,
+0.70%

is next.

The September Jobs Openings and Labor Turnover Survey (known as Jolts) is due after the market open, alongside the November University of Michigan consumer sentiment index.

Austria’s worst COVID-19-affected region will put millions of unvaccinated people under lockdown starting next week, as much of Europe battles another wave of infections.

President Joe Biden and Chinese President Xi Jinping will reportedly hold a virtual summit on Monday.

The markets

Uncredited

Stock futures
ES00,
+0.06%

YM00,
+0.04%

NQ00,
+0.04%

are rising modestly, but bonds have resumed a selloff, with the yield on the 10-year Treasury
TMUBMUSD10Y,
1.566%

creeping up after that market returns from Thursday’s holiday. Gold
GC00,
-0.04%

is giving back recent big gains and oil
CL00,
-0.12%

BRN00,
-0.27%

is off 2%, with bitcoin
BTCUSD,
+1.52%

also under pressure.

The Russian ruble
USDRUB,

is tumbling against the dollar over concerns of troop buildup on the border with Ukraine. An envoy from Russia said there won’t be an invasion, unless “we’re provoked.”

The chart

Ouch. Our chart of the day from Bank of America’s weekly Flow Show report puts inflation in perspective with the estimated cost of a turkey (gulp) this Thanksgiving.

Read: Good luck escaping inflation — the biggest contributors to the 31-year high include rent, gas and groceries

Random reads

3,000 miles later, a rare penguin ends up in New Zealand.

The real Venom? A deadly spider with fangs long enough to bite through a human fingernail is going to help save lives.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Want more for the day ahead? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive commentary from Barron’s and MarketWatch writers.

ShareTweetPin

Related Posts

RBC downgrades Boston Beer, cuts price target on waning popularity of Truly hard seltzer

by
July 7, 2022
0

Boston Beer has "too much to overcome" for now as the popularity of hard seltzer fizzles out, and as it...

Top SoftBank exec steps back from role at Vision Fund as pressure mounts on investments

by
July 7, 2022
0

In this article 9984.T-JP Rajeev Misra will step down from his role as CEO of SoftBank Global Advisors, which manages...

Volkswagen CEO says EV outlook is ‘very good,’ expects to reduce delivery times this year

by
July 7, 2022
0

In this article TSLA F GM VOW-DE VOW3-DE An ID. Buzz stands during a plant tour of the production of...

UK Prime Minister Boris Johnson resigns

by
July 7, 2022
0

LONDON -- U.K. Prime Minister Boris Johnson resigned Thursday, bringing an acrimonious end to a nearly three-year premiership that has...

The UK’s Boris Johnson has stepped down. Here’s what happens next — and who could replace him

by
July 7, 2022
0

Johnson will visit Northern Ireland on Monday to hold emergency talks. Daniel Leal | Afp | Getty Images After an...

Next Post

Countries strike deal at COP26 climate summit after last-minute compromise on coal

Bitcoin's biggest upgrade in four years just happened - here's what changes

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

email

Get the daily email about stock.

Please Enter Your Email Address:

By opting in you agree to our Privacy Policy. You also agree to receive emails from us and our affiliates. Remember that you can opt-out any time, we hate spam too!

MOST VIEWED

  • Crocs sees fourth-quarter sales up 42%, CEO Andrew Rees says 2021 was ‘exceptional year’

    0 shares
    Share 0 Tweet 0
  • Buying a car from the factory sounds expensive, but it can actually save you money. Here’s how to do it.

    0 shares
    Share 0 Tweet 0
  • Roth TSP vs. Roth IRA: How Do They Compare?

    0 shares
    Share 0 Tweet 0
  • The states that won’t tax military retirement in 2022

    0 shares
    Share 0 Tweet 0
  • Allbirds stock has plunged 50% in two months, now one top analyst says buy it

    0 shares
    Share 0 Tweet 0
  • Home
  • Trading News
  • Email Whitelisting
  • Privacy Policy
All rights reserved by www.stockmarket-cafe.com
No Result
View All Result
  • Home
  • Trading News
  • Email Whitelisting
  • Privacy Policy

All rights reserved by www.stockmarket-cafe.com