Despite a sluggish economic recovery, U.S. stock prices have surged more than 75 percent from the lows of last March.
Many experts are beginning to say the move is overdone.
“The market is as overvalued now as it was undervalued a year ago,” says David Rosenberg, chief economist for Gluskin Sheff.
“There’s a very high degree of complacency,” he told The New York Times.
Discouraging numbers abound, from an unemployment rate at 9.7 percent to a budget deficit that surpassed $1.4 trillion last year. Yet the stock market knows nothing but good news right now.
Price-earnings data indicate the market has little room for further appreciation. The P-E ratio for the Standard & Poor’s 500 Index stands about 13 percent above the average of the past five years, according to The Times.
That’s a far cry from last year, when the P-E was 40 percent below the average.
“The stock market has priced in a bit more than what we’ve got so far,” Jeffrey Hirsch, editor of The Stock Trader’s Almanac, told The Times. “We’re due for a pause.”
He sees stocks plunging 20 to 30 percent before rebounding.
But not everyone is bearish.
“The latest economic numbers have been pretty good, particularly in the consumer front,” James Paulsen, chief investment strategist at Wells Capital Management, told Bloomberg.
“That indicates a sustainable recovery, which is good for stocks. On top of that, the situation in Europe seems to have calmed down.”
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