Some say that the Stock Market is overvalued as much as it was overvalued in 1929, when came the most epic collapse in US stock market history. Exactly 2 standard deviations from the mean. However, the current record is not so. In 2000, the market was worth 3.7 standard deviations greater than the mean value. In 2000 the market was nearly twice as much as it is now. There is another important factor – the ratio of stock market capitalization to GDP. It now stands at 131%. (Stock market capitalization of 24 trillion. Dollars). In 2000, before the market collapse, this index value was 150%.
Warren Buffet happened to speak on the stock market being overvalued, on February 27 with CNBC in an interview. He for one did not rationalize the thought that the stock market is overvalued. Yes, you could consider the stock market is overvalued only if interest rates have been 7-8%, but that has not been the case. In terms of Buffett, the stock market should adequately show for the current level of interest rates. Now he owns shares of the Apple package which is worth 20 billion since Apple doubled its investment in shares in 2017. Dollars. Buffett is actively investing in the US stock market and it turns out that it is still too profitable for many.
The stock market will continue to grow of the at least from our point of view in the US. The current situations do not need comparisons with the collapse of 1929. So they would not be entirely without gold, the Fed began to squeeze the money supply, especially in 1929. Consequently the crash was caused by this fact that. Now this is not a problem in modern times. The same situation can not even be compared to what went on with the year 2000. 5.25% was the Fed discount rate then, also the money was less. What now is only the velocity of circulation M2 of 1.4 was 2.1 then. In short, we think the time for a serious drop in the US stock market has yet to come.