2019-08-24 14:38:00 Sat ET
stock market gold oil stock return s&p 500 asset market stabilization asset price fluctuations stocks bonds currencies commodities funds term spreads credit spreads fair value spreads asset investments
Warren Buffett warns that the current cap ratio of U.S. stock market capitalization to real GDP seems to be much higher than the long-run average benchmark. With the current cap ratio of 146.4x, U.S. stock market capitalization represents at least 146 times American national income per year. This current cap ratio exceeds the long-run average benchmark of 80x by more than 80%, and is historically second to the peak of irrational exuberance near 148.5x during the dotcom bubble back in March 2000. From 2018Q3 to 2019Q2, the S&P 500 delivers a 12-month net profit of about $135 per share, and the S&P 500 aggregate share price rises to $3000+ per share. The equivalent S&P 500 P/E ratio thus hovers in the broad range of 22x to 24x. This narrow range well exceeds the long-run average benchmark of 15x to 16x. Long-term stock market capitalization and corporate profitability should move in tandem. If these key metrics stray too far apart, it can be prohibitively expensive for U.S. public corporations to get back to balance.
From this fundamental perspective, the normal stock market forces may pull equity valuation back to the long-run average yardsticks relative to U.S. national income and corporate profitability.
If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.
2018-03-01 07:35:00 Thursday ET

Trump imposes high tariffs on steel (25%) and aluminum (10%) in a new trade war with subsequent exemptions for Canada and Mexico. The Trump administration
2018-06-10 19:41:00 Sunday ET

Apple enters a multi-year content partnership with Oprah Winfrey to provide new original online video and TV programs in direct competition with Netflix, Am
2017-04-19 17:37:00 Wednesday ET

Apple is now the world's biggest dividend payer with its $13 billion dividend payout and surpasses ExxonMobil's dividend payout record. Despite the
2018-05-29 11:40:00 Tuesday ET

America and China, the modern world's most powerful nations may stumble into a **Thucydides trap** that Harvard professor and political scientist Graham
2017-05-25 08:35:00 Thursday ET

Treasury Secretary Steve Mnuchin has released a 147-page report on financial deregulation under the Trump administration. This financial deregulation seeks
2023-12-03 11:33:00 Sunday ET

Macro innovations and asset alphas show significant mutual causation. April 2023 This brief article draws from the recent research publicati