By all measures, the financial markets are over-pricing forward expectations and underpricing risk. Various estimates suggest that globally some $20 trillion worth of government and private debt traded in the markets is currently priced at a gross underestimate of risks implied by the path of the monetary policies and borrowers' debt carry capacity. The stock markets are showing signs of excessive concentration and share prices are on fire: even as past buybacks and current accounting standards continue to inflate earnings, S&P 500 median priceto-revenue ratio is hitting all time highs of c. 250 percent, compared to the dot.com bubble peak of 170 percent and pre-GFC bubble high of 180 percent. U.S. stock market valuation is currently running at just over 135 percent of GDP — the second highest reading in history after 152 percent mark hit at the peak of dot.com bubble and well above 110 percent peak before the GFC collapse.
Source: Lessons From The GFC - Beware The Next 'Soft Landing' Calls
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