You can add Nobel laureate economist Robert Shiller to the list of those who worry that stock prices are way overvalued.
Indeed, his investor confidence surveys show greater fear that the market is overvalued than at any time since the dot-com bubble crested in 2000, the Yale professor told the Financial Times.
“It looks to me a bit like a bubble again, with essentially a tripling of stock prices since [March] 2009 and at the same time people losing confidence in the valuation of the market,” Shiller said.
To be sure, that doesn't mean the stock market is about to crash, he cautioned. “I’m not looking for any big effect. It’s been talked about for so long, everyone knows that it’s coming. It’s just not much of a big deal.”
For months, Shiller's cyclically-adjusted price-earnings ratio for the S&P 500, which includes 10 years of earnings, has stood at the fourth highest level in history, behind only the pre-crash periods of 1929, 2000 and 2007.
The S&P 500 registered 1,957 Monday morning, down 8.3 percent from its May 20 record high of 2,134.72.
The index has rebounded 4.7 percent from its Aug. 25 low, and ace market strategist Edward Yardeni, president of Yardeni Research, says the rebound may continue.
"Investors are fretting over lots of known unknowns," he writes on his blog. That includes the depth of China's economic slowdown, Yardeni says.
"Might it be hard enough to cause a global recession?"
Then there's the recent plunge of commodity prices to 16-year lows. That "might be good for consumers, but bonds issued by commodity producers are at risk of default," Yardeni maintains.
In addition, "if the Fed does start raising rates, might that cause a massive unraveling of global carry trades?" Yardeni asks. Many economists expect the central bank to begin raising interest rates at its meeting next week.
Given all the unknowns, it's "no wonder investors aren’t in a festive mood," Yardeni says. "Nevertheless, stocks may be set up for yet another relief rally if all the worst-case possibilities of the known unknowns don’t unfold."
And the U.S. economy remains "resilient and strong," he says. GDP grew 3.7 percent in the second quarter, though the Atlanta Fed's forecasting model puts growth at just 1.5 percent for this quarter.
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