Ratio shows share prices at level well above dot-com boom
An RNZ Business analysis shows that long-term valuation ratios for the S&P 500 have now overtaken the level seen during the dot-com boom of the early 2000s. New Zealand-based analysts are issuing caution signals for global equity markets.
RNZ Business cites that Robert Shiller's CAPE (cyclically adjusted price/earnings) ratio for the S&P 500 has moved above 38. That puts it above the peak reached at the height of the dot-com bubble in early 2000.
New Zealand portfolio managers note that the ratio is now running two standard deviations above its long-term historical average, a level that has historically coincided with extended periods of low future returns. The rally led by artificial intelligence and large-cap technology is pulling valuations higher.
Analysts urge long-term investors to review portfolios and consider increasing diversification. The ratio is not a short-term signal, but it points to an environment in which 10-year expected returns are compressed. This is not investment advice.
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