Today, Its The Median, Not The Mean, S&p 500 Valuation That Sits Well Above The Peaks Seen In 2000 And 2007, Indicating That There Are Far More Companies These Days Thats Shares Trade At Much Higher-than-normal Valuations.

That metric looks at the value of all non-financial stocks relative to a specialized earnings measure, which Hussman calls value-added. Based on his analysis, Hussman says the market is as overvalued as it was back in 2007, and just 5% away from its lofty valuations right before the peak in 2000. But Hussmans main point is that back in 2000 and 2007 there were a relatively small group of super-expensive stocks, including technology, and later finance and housing companies, respectively, that drove the average valuation of the stock market much higher than normal. Today, its the median, not the mean, S&P 500 valuation that sits well above the peaks seen in 2000 and 2007, indicating that there are far Medical marijuana more companies these days thats shares trade at much higher-than-normal valuations. Thats why Hussman says the risks of investing in the stock market right now are much more widespread and scary than they were in the past. Indeed, stocks have now gone eight years without a bear market–a drop of 20% or more . Thats much longer than usual and a red flag for many warning that the market is due for a dip. Hussman says investors have been mesmerized by low interest rates. But low interest rates also signal a sluggish economy, which will translate to lower revenue figures. Historically, if the economy picks up, interest rates will rise. That will boost earnings, but the high interest rates will make those earnings worth less to stock market investors.

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