Anthony Pompliano highlighted that investors’ concerns about a potential market bubble might be hyped, given that stocks are still trading at cheaper levels despite the record-high U.S. market.
In Monday’s post on X, Pompliano said, “The cheaper stocks have become this year, the more people are yelling about a bubble. It just makes no sense.
Record High Stock Market
The U.S. stock market has been hitting new highs, as investors bet on artificial intelligence, resilient earnings and a still-growing economy. The S&P 500 is on its largest winning streak since December 2023, having risen for eight weeks in a row. The index is up 9.2% since the start of the year.
This Key Metric Suggests No Bubble
A stock market bubble forms when the stock prices surge beyond their actual value. Currently, this situation seems unlikely considering the P/E ratio.
According to FactSet data, the S&P 500 is currently trading at a forward price-to-earnings ratio of 21.1, slightly above its five-year average of 19.9 and 10-year average of 18.9. Notably, the P/E ratio indicates how much investors are paying for every $1 of expected profit.
The S&P 500 reached an extreme valuation during the peak of the 2000 dot-com bubble with a trailing 12-month P/E of 29.41 in March 2000 and 33.28 in October 2020, according to Macrotrends data.
Mixed Views on Market Bubble
CNBC’s Jim Cramer has previously discussed how today’s market is punishing disappointing stocks more severely than during the 1999 dot-com bubble era. Cramer noted that while the S&P 500 closed at record highs, the market is punishing companies like Abbott Laboratories (NYSE:ABT) that have disappointed.
The latest data showed that the stocks are partying like 1999 while Americans are losing confidence at levels not seen in 70 years, highlighting the disconnect between stocks and happiness.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by a Benzinga editor.
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