Yep, Stocks Are Back In A Bubble | Jonathan Treussard
Mar 28, 2024
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Former partner at Research Associates, Jonathan Treussard, warns of stock market bubble. Topics include conflicting economic signals, consumer perceptions, Reddit's IPO, FOMO investing, AI risks, and economic uncertainties.
High valuations in US large caps indicate a potential market bubble, raising concerns about sustainability.
Global economy faces resilience challenges amidst risks, impacting consumer behavior and market conditions.
Stock market rally's sustainability questioned due to high valuations, double shares, and narrow breadth risks.
Deep dives
Current Valuations at Historical Highs
US large caps are trading at the 97th percentile of Cape data since 1880, indicating high valuations. This raises concerns about a potential bubble in the market, especially with the recent surge in stock prices.
Global Economy Resilience and Uncertainty
The global economy is balancing resilience with significant risks, including geopolitical factors and uncertainties in various sectors. Despite a strong US economy, there is confusion and concerns about inflation and prospective risks, impacting consumer behavior and market conditions.
Sustainability of Stock Market Rally and Nvidia's Valuation
The sustainability of the stock market rally is questioned, with the S&P's substantial gains raising concerns about rational exuberance. Nvidia's remarkable performance has led to doubled shares, driven by AI applications, but its high valuations and earnings sustainability are being scrutinized, indicating potential risks amidst the market's narrow breadth.
Market Evaluation and Bubble Concerns
The discussion delves into market evaluation and the possibility of being in a late-stage market bubble. There is concern that the gains seen in the market may not be sustainable, indicating the potential for a substantial correction or prolonged stagnation. Historical data and market valuations suggest that much has already been factored into current prices, signaling a cautious approach towards further investment in US stocks.
Non-Monetary Investment and Life Assessment
The conversation extends to non-monetary investments, highlighting the importance of personal well-being. A recommended life assessment method by Martin Schwartz emphasizes multiple dimensions of happiness beyond fame or wealth, including relationships, creativity, and personal growth. Encouragement is given to reflect on various aspects of life to enhance fulfillment and overall happiness.
Animal spirits have certainly been running wild in the stock market of late.
The S&P is up over 1,000 points (roughly 25%) in the past 4.5 months.
Is this a new era of easy gains as giddy bulls are proclaiming? One investors should jump in and make the most of?
Or is this the latest incarnation of irrational exuberance? And is caution warranted instead?
For insight, we're fortunate to speak today with Jonathan Treussard, former partner and head of product at Research Associates, and now founder of Treussard Capital Management.
Jonathan, who authored academic research on financial bubbles at UCLA, indeed concludes we are in the midst of another such bubble now.
Follow Jonathan at https://www.treussard.com
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#bubbles #nvidia #nvda
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