According to Ned Davis Research, the stock market is more overvalued than it has been since the dot-com bubble

According to Ned Davis Research, the stock market is more overvalued than it has been since the dot-com bubble

According to an article by Business Insider, based on an analysis by Ned Davis Research (NDR), the stock market is currently more overvalued than it has been since the dot-com bubble burst. NDR examined the relationship between the S&P 500 earnings yield and the return on cash and found that stocks appear less valuable compared to cash. This is partly because investors can currently achieve a return of over five percent on their cash. This situation has led to a significant increase in flows into money market funds, with over $1 trillion in investments since March 2022.

This overvaluation of the stock market can have various effects. On the one hand, this could lead to a decline in share prices if investors increasingly withdraw their capital from the stock market and invest in money market funds or other forms of investment with higher returns. This could lead to a loss of investor confidence and jeopardize the stability of the market.

On the other hand, this situation can also offer opportunities. Investors who diversify their investments and invest in less overvalued markets or companies could benefit from cheaper entry prices and achieve higher returns in the long term.

However, it is important to note that financial markets are extremely complex and volatile, and accurately predicting the impact is difficult. Further analyzes and observations are required in order to better assess the exact course of the market.

Source: According to a report by Business Insider.de, 2023, URL: https://www.businessinsider.de/wirtschaft/international-business/grafik-soll-ziehen-dass-der-aktienmarkt-so-ueberbewertet-ist-wie-seit-dem-platzen-der-dotcom-blase-nicht-mehr/