That’s one of the issues addressed by Swissquote senior analyst Ipek Ozkardeskaya in her daily note today.
“US net margin debt exceeded 1.25% of US market capitalisation at the end of April, the highest level on record going back to 1997,” she wrote.
“The last time US net margin debt was this high was just before the dot-com bubble burst.
“So we keep returning to the same question: Is this a bubble?
“As an economist, I will repeat that it isn’t a bubble until it bursts. But a few indicators are flashing red.
“Market breadth is one of them. The equal-weighted versions of the major tech-heavy indices are lagging behind their cap-weighted counterparts, and they have good reasons to do so, including rising energy prices, higher inflation expectations, rising global yields and a deteriorating economic outlook. The gap between the Kospi and its equal-weighted version is especially worth noting.
“In the US, the Nasdaq’s PE [price-to-earnings] ratio has climbed to historically uncomfortable levels. The CAPE ratio is approaching 40 — the last time that happened was during the dot-com bubble.
“And the Buffett Indicator — which measures total stock market value as a share of GDP — has surged above 230%, the highest level on record by a wide margin. For perspective, it peaked around 130% during the dot-com bubble.
“These metrics do not answer the question of whether this is a bubble, nor do they necessarily mean a crash is imminent. But they do suggest that investors are paying significantly more for each dollar of economic output than at any point in modern market history.”
#ICYMI Alan Kohler’s That’s Business interview this week is with AI giant Anthropic’s chief economist Peter McCrory.