Stock Market Bubble: Cause for Concern?

According to Jenermy Grantham and other stock market commentators, the US stock market is in a bubble. But is this true and should investors be worried? In this video, I look at valuations, and consider why this matters. I also discuss whether we should reduce our US allocation, show you how you can do this and finally consider what might make the bubble pop.

When you invest, your capital is at risk. The share value probability is weighted, so more expensive shares will be rarer. T&Cs apply.

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DISCLAIMER
All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results.

[tomp]

Excellent video as usual. Sound sane advice. Regarding your single fund strategy it might make an interesting video to look at levels of protection against loss for different asset types with different providers…. In case of internal fraud (FTX etc), liquidity problems (Northern Rock etc) or other external threats (cyber attack etc). Having 90% of your wealth in a single fund with a single provider must carry some risk….

[Christian-ehiu]

Could you make a video about pros/cons for ETFs based in Ireland vs. Luxembourg? How do withholding tax with more, impact the performance of the ETF? Thanks for all your great content😀

[JT_Soul]

Great video. I appreciate the discussion of diversifying geographically and into more reasonably valued sectors like financials and real estate. Two other ways I can think of to avoid over-concentration in a handful of very overvalued US mega caps: 1. Buy small caps and medium caps. There's a lot more to the US market than the S&P500, and there are plenty of ETFs that offer exposure to smaller US equities. 2. Buy an equal-weighted S&P500 ETF. This provides exposure to the S&P500 without over-exposure to a handful of extremely over-valued tech stocks. I'd be interested in hearing your thoughts on these two options! Thanks for your always excellent content!

[timwood]

Always grateful for your objective commentary and analysis. Also thought your podcast with Michael on cognitive bias was an excellent listen.

[AaronRobinson]

Would have been great to consider factors like the inverted yield curve, bond yields, gold and crypto in this discussion as equities appear to be an anomoly

[MikesGlitch]

Munge. That's a good word... I'm gonna munge that into my vocabulary

[matthewtjersey]

I wonder where the huge amounts of capex that I suspect will come out of money market funds as rates reduce will be allocated ? That might provide extra stimulus, particularly in under valued markets.

[george]

The IPO flow does not suggest we have reached the market peak.
I remember Greenspan's 'irrational exuberance' warning, and the market kept rising for years.

[jon]

Thank you, Ramin. Long time follower and always appreciate your analysis.

[MarkCW]

Great video as always Ramin. I'm heavily invested in US and AI so you have got me thinking. Although I think AI, robotics and semiconductors aren't short-term hype and are actually world changing technologies that will have a huge impact on our future.

[adamwilliams]

Appreciate your thoughts and you just confirmed my approach to staying invested in a diverse group of US and international low cost index funds. Markets go up and down. Stocks are cheap then expensive, whatever. Always be buying no matter what happens and just ignore the noise. Thank you Ramen.

[mbrechenser]

Hi Ramin, I’m looking to move an old work place pension into a SIPP so I can manage it myself and have more flexibility to invest in things other than funds. Do you have any recommendations. Any help is greatly appreciated. Thanks.

[edan]

nice chart, pulling the top 8 out of the rest...
that tells a different POV

[mccannger]

Great video as always and lots to think about. Love to hear your thoughts on using an equal weighted fund to stay at a high percentage in the US but derisk based on the weightings being equal versus the Mag 7 or Fab Four or whatever being so huge. Thanks

[MagicNash]

Disagree about putting JUST Japan separately, there are lots of PACIFIC ETFs, which include Japan, Australia - which is what you really want, they also include Hong Kong, Sigapore, New Zealand, depending on the fund.

[philkeh]

In Europe you can find really good companies to reasonable prices. I just baught a Belgian/German Semi fab called X-FAB SILICON FOUNDRIES. It is supplier to automotive, medical, IoT and other growth sectors with mixed signal semis. Its kind of a smaller Infineon with excellent mgmt, strong growth, little debt and with a P/E of 6!!!

[eweng]

Trouble with forward P/E is research has shown a weak correlation between forward P/E and future stock returns for the S&P 500. Staying invested is a good way of avoiding the problem of inaccurate market analysts causing you to mistime the market and end up with a lower return.

[timetraveller]

There's over 6 Trillion $ in money market funds waiting on the side for the Fed to cut interest rates. Where will this money go? I would guestimate that the S&P 500 will be the major beneficiary.

[Aggnog]

I don't see the point of splitting funds just to weigh regions on your own. The whole point of indexes is that they were weighted according to their performance.

[ldg]

Small caps aren't expensive, you can tell because nobody talks about them anymore. Except for in India where they're all the rage and in a bubble.