Just my humble opinion obviously. Here’s why:
I’ve seen a lot of people, including a couple of big names comparing the current market to the 1930’s and the dot com era. In my opinion the state of the market is nothing like this.
During the Great Depression people were way over leveraged, which is what essentially caused the crash, similar to the housing bubble that burst in 2007. Too much borrowing caused a bubble that was not sustainable. Currently margin debt is below average in relation to stock market value.
During the dot com bubble there was very clear over pricing of stocks, with the nasdaq composite average P/E ratio exceeding 100 for example. Right now the average P/E ratios are nothing out of the ordinary.
Further, despite interlinkage of global markets, the US stock market is arguably strengthened due to the weaker Russian, European, and Chinese markets, resulting in US stocks becoming almost a safe haven which could command higher valuations than average being reasonable.
There are troubling world events but a lot has been priced in and the stock markets have faced and recovered quickly from similar issues in recent decades. I think the crashes and recoveries of the last 20 years in particular have actually instilled a lot of confidence in the stock market, which has brought it to a new level of maturity (despite memes). This market perception is not easy to quantify or even be aware of.
People are very aware that markets can crash, which I think is making people overly cautious right now in an undervalued market. At the same time, the markets have withstood many big tests in recent times which they have recovered relatively quickly from, I don’t see the masses logically losing faith in the markets as a whole like in previous major crashes anytime soon. I think we are going to climb a big wall of worry.
I doubt anyone is going to alter their investment decisions based on my opinion, but obviously don’t. Think for yourself. These are simple points but I haven’t seen anyone make much of a logical argument against the whole bubble idea which is why I wanted to share my thoughts. Thanks for reading.
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