The U.S. stock market has become even more overvalued in the two weeks since Donald Trump’s election as the next U.S. President. And that’s saying something, since it was already hugely expensive.
The price/book ratio, which stands at 2.7 to 1. at 23 of the 29 major market tops since then, the price/book ratio was lower than it is today.
The price/sales ratio, which stands at an estimated 1.9 to 1. at 18 of the 19 market tops since then the price/sales ratio was lower than today’s.
The dividend yield, which currently is 2.1% for the S&P 500 . At 31 of the 36 bull-market peaks since 1900, the dividend yield was higher.
The cyclically adjusted price/earnings ratio, which currently stands at 26.6. This is the ratio championed by Yale University’s Robert Shiller. It was lower than where it is today at 30 of the 36 bull-market highs since 1900.
The so-called “q” ratio. Based on research conducted by the late James Tobin, the 1981 Nobel laureate in economics, the ratio is calculated by dividing market value by the replacement cost of assets. According to data compiled by Stephen Wright, an economics professor at the University of London, and Andrew Smithers, founder of the U.K.-based economics-consulting firm Smithers & Co., the market currently is more overvalued than it was at 30 of the 36 bull-market tops since 1900.
P/E ratio. This is the valuation indicator that is perhaps most-often quoted in the financial media. Nevertheless, according to data on as-reported earnings compiled by Yale’s Shiller, and based on S&P estimates for the third quarter, this ratio currently stands at 24.4 to 1. That’s higher than at 89% of past bull-market peaks. To be sure, the stock market has been overvalued for several years now, and so far a bear market has been averted. But that doesn’t mean it can be postponed forever.
Nick Bit: This is the biggest bubble market ever. No matter what Trump does or doesn’t do. In the next 12 months this stock market will lose at least half its value.