2024-03-16 01:15:40
March 16, 2024 Today at 02:15
Should we fear a bubble on the American stock markets like in 2000? For Burton Malkiel, the answer is no. Or not immediately…
Burton Malkiel, 91, is a widely respected expert on Wall Street. He got into the stock market at a young age, seeking to discover why stock prices changed from one day to the next. In 1973, this Harvard and Princeton graduate who began his career on Wall Street even wrote a book regarding his passion for the stock market. This book, “A Random Walk Down Wall Street”, is still a reference and even celebrated its fiftieth anniversary last year with a thirteenth edition.
Valuations were considerably higher in early 2000 than they are today.
Should we fear a bubble on the US stock markets like in 2000 with Internet stocks? In a carte blanche published in the weekly Barron’s, he replied no. Or at least not immediately.
Certainly, valuations are high. The cyclically adjusted price-to-earnings ratio (Robert Shiller’s CAPE ratio) is 34, double its historical average of 17. But valuations were considerably higher in early 2000 than they are today today. The ratio was then 44.
As for Nvidia, the undisputed star in the markets, he emphasizes that the company’s recent growth is simply unprecedented. And artificial intelligence promises to contribute to huge advances in productivity and might be as important as the industrial revolution.
According to him, today’s stock market may be more like the market of 1996, when prices continued to rise for years, than at the beginning of 2000, when prices collapsed. So, see you in four years?
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