After hitting a record high March 2, the S&P 500 remains within 2 percent of that peak, making many market participants concerned about the possibility of a plunge.
Michael Pento, president of Pento Portfolio Strategies, is one of them.
"It is clear stock prices are still extremely overvalued by virtually every metric, especially when viewed in the absence of GDP and earnings growth," he writes in a commentary for CNBC
First, Pento cites Robert Shiller's cyclically adjusted price-earnings ratio for the S&P 500, which stands at 27.1, compared with an average of 16.6 going back to 1881.
Second, the ratio of total market capitalization to GDP is now 125 percent, the second highest in history after the 2000 technology bubble and well above the 110 percent that prevailed in 2007, Pento notes.
As for GDP growth, it totaled only 2.2 percent in the fourth quarter, and the Atlanta Federal Reserve's forecasting model shows growth of only 0.1 percent for the first quarter.
When it comes to earnings S&P Capital IQ predicts a decline of 2.9 percent for the first quarter and 1.8 percent for the second, Pento says.
"The markets may continue to surge further into record-bubble territory. However, investors should pay close attention to April's economic data, the Fed's strategy surrounding its first rate hike and also keep a close eye on the long end of the yield curve. That is, if they want to avoid getting consumed by the third massive collapse in equity prices since 2000," he argues.
Meanwhile, you can add former Treasury Secretary Robert Rubin to the list of those concerned that bubbles might be building in financial markets.
"I don't have a personal view on whether we now have [market] excesses or not," he said at a conference in last week Wednesday, MarketWatch
"But it certainly is a realistic possibility when you look at the U.S. stock market, which is near all-time highs, when you look at covenant-light and now non-covenant lending, [and] a vast increase in fixed-income [exchange-traded funds]."
While the Fed is focused on inflation and the economy, it should keep an eye on financial markets too, Rubin said.
"I believe that the Fed should take systemic risk into consideration in monetary-policy decisions, even though excesses and bubbles are impossible to identify with confidence except ex-post."
The central bank has kept its federal funds rate target at zero to 0.25 percent since December 2008. Many economists believe it will start raising rates in September.
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