Stocks Definitely Overvalued – Government Shutdown Looms
January 16, 2018
I don’t make market predictions very often. Normally, I leave those decisions to the professional money managers we recommend at Halbert Wealth Management. However, some recent developments have made me very concerned that the US equity markets are at high risk for a serious downward correction just ahead.
As I will argue below, the US stock markets as measured by the Dow Jones and the S&P 500 are now more overvalued than at any time since the “dotcom” bubble burst in 2000. The latest surge from 24,000 to 25,000 in the Dow took only 24 trading days, a new record for a 1,000-point advance. And in just the last seven trading days, the Dow has exploded another 1,000 points to top 26,000. Let’s face it, we’re in a bubble!
You may recall that the S&P 500 Index plunged by almost 45% starting in September 2000 until the bottom in August 2002. In 2000, most investors believed the bull market would continue indefinitely as they do today. “Things are different this time,” we were told back then. But they weren’t, and one of the worst bear markets in history unfolded.
I’m not predicting that will happen just ahead. US stocks have continued to soar since the Dow topped 25,000 and this could continue… or not. No one knows where this greatest bull market will top out. Yet today I’m going to present you with some analysis (which you aren’t likely to read elsewhere) that makes me believe we may be approaching the top, or at least a serious downward correction. Let’s get started.