Are Stocks Massively Overvalued as GDP Ratio Peaks

How Badly Are Stocks
Overvalued?
By www.ProfitableTradingTips.com

http://profitabletradingtips.com/profitable-trading-tips/how-badly-are-stocks-overvalued
The S&P 500 is at an all-time high,
spurred recently by hopes of
economic stimulation policies of the
Trump administration.

It may be that some traders have put
the cart before the horse.

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In other words they are betting on
something that may or may not
happen and the market has become
over-bought.

How badly are stocks overvalued
today?

cnbc says stocks are massively
overvalued.

market valuation can be measured in
many ways, but one comparison of
equity values to economic output
yields a troubling conclusion.

right now, the total market cap of the
wilshire 5000 index as a percentage
of u.s. gross domestic product is
about 120 percent, far above the 45-
year average of 75 percent.

to some, this indicates that stocks are
priced too richly, and hence may not
be a good buy at these levels.

Yes, you say, but Trump economics
will boost the economy and the GDP
will go way up bringing the Wilshire
to GDP ratio back to historic norms.

Unfortunately even the 4% growth
that Trump’s people say the nation
can attain will not be enough.

“even if we were to see exceptionally
fast growth over the course of the
next eight years to the tune of 8
percent nominal gdp growth per
year

we would still be at 80 percent
market cap to gdp, which still puts us
above that long-term average,” mark
tepper, president of strategic wealth
partners, said friday on cnbc’s
“trading nation.”

Every time the market becomes
overpriced there are analysts saying
that times are different and the
market is different and every time
they are wrong because the market
corrects or crashes.

And, how badly are stocks overvalued
if Trump’s plans do not work out?

What if he indeed starts a global trade
war?

business insider quotes Goldman
Sachs on how Trump will escalate
a trade war with China.

us president donald trump’s trade
advisor, peter navarro, proposed a
blanket 45% tariff on all chinese-
made goods.

and goldman sachs analysts andrew
tilton and alec phillips said they saw
“little reason to believe” that trump
would back down on imposing
restrictions on chinese imports such
as on steel and machinery.

“we believe the trump administration
is likely to make an announcement on
china’s currency policy and impose
unilateral tariffs on a number of
products,” the analysts said in a note
to clients.

“in general, we expect this
administration to be much more
active in using existing ‘trade
enforcement’ tools than recent
administrations.”

Analysts believe that Trump would
start with limited actions instead of
blanket tariffs because enactment of
the 45% plan would immediate ignite
a trade war with the Chinese raising
tariffs on US goods to 80 or 90%.

The sad fact is that the most Trump-
friendly cities will be hurt the
most by a potential trade war
according to fortune.

the top five u.s. cities that depend the
most on exports include columbus,
ind.; beaumont, texas; lake charles,
la.; elkhart, ind.; and kokomo, ind.

larger cities likely to be most affected
in a trade war include baton rouge,
la; wichita, kansas; new orleans;
seattle; and detroit, the report said.

such communities have less flexibility
to adapt to the effects of a trade war,
mark muro, head of brookings’
metropolitan policy program, told
the journal.

Parts of the USA that are less flexible
and more dependent on exports
would be hurt the worst by a trade
war.

If this comes down you can expect
stocks to fall dramatically.

How badly are stocks overvalued now
if there is a looming trade war?

Think in terms of 2008 or more likely
1929 and the Great Depression that
followed.

Are Stocks Massively Overvalued as GDP Ratio Peaks

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