Ask The Compound

Is the Stock Market Overvalued?

Jan 14, 2026
Guest
Barry Ritholtz
Barry Ritholtz, founder of Ritholtz Wealth Management, shares his insights on valuing today's stock market. He debates the impact of rising profit margins on P/E ratios and suggests diversifying into cheaper investments. Ritholtz warns that a 10% cap on credit card interest rates could hurt consumers by limiting credit access. They also discuss the importance of reliable financial news sources and maximizing employer 401(k) contributions versus waiting to save for larger down payments. This conversation is packed with valuable financial strategies!
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INSIGHT

Valuations Require Modern Context

  • Valuations need context because companies and profit margins today differ greatly from the past.
  • Rising profit margins explain much of the recent multiple expansion in top tech stocks.
INSIGHT

Profit Margins Have Trended Upward

  • Corporate profit margins have steadily increased every decade as firms become less capital-intensive and more efficient.
  • Higher margins support higher market valuations over time.
ADVICE

Diversify Instead Of Fleeing To Cash

  • If the S&P 500 valuations worry you, diversify into cheaper segments like value, small caps, or foreign stocks.
  • Avoid moving all to cash; use diversification to manage valuation risk.
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