经济学周刊估值和泡沫

William Blair It feels a little like investors have returned from theirAugust beach holiday, and, with a fresh pair of eyes atthe start of September, looked at the stock market and itsvaluations and once again started to question whether weare in the midst of an equity market bubble. In the last few are really only known after the fact, in that if there isn’ta crash, then it probably wasn’t a bubble. Exhibit 2, forexample, shows the percentage change in the market fromthe low over the previous three years. The current reading weeks, we have had a large number of investors sendingus uncomfortable looking charts of stock market valua-tions as proof the market is in bubble territory.In thisEconomics Weeklywe again discuss the issue of a stock High Valuations Today Suggest Lower Returns TomorrowIn the last few days we have seen both the S&P 500 and the NASDAQ indices hitting record highs. While this may not beparticularly shocking, we have also continued to see stagger-ing increases in what are already global mega-cap companies.For example, this week saw a 36%one-daygain by Oracle(market cap $933 billion). This gain is also a good example It is roughly the same reading as in 2021, which was alsothe last time the S&P 500 forward P/E multiple was as highas it is today at 22.3x relative to its historical median of16x. It is not, however, as high as during what was a pure Nevertheless, with these sorts of gains it is no surprisethat we are once again hearing plenty of banter about bub-bles and growing fears about a stock market correction.Indeed, a quick scan of the internet using Google Trendssuggests we are clearly not alone in hearing this kind oftalk or reading numerousarticleson the subject (exhibit The higher the multiple, of course, the more investorsare willing to pay for uncertain expected future earnings;and, therefore, the more sensitive and vulnerable theybecome to a future that may not turn out to be quite as While there is no official definition of a bubble, it is generallyassociated with a sharp increase in price (normally a dou- William Blair Other measures, meanwhile, such as the CAPE (cyclicallyadjusted P/E ratio) and the equity Q ratio—both indepen-dent of each other, and both mean reverting—are simi- Household Exposure to the Equity Market Is HighAnother reason we should be wary of high multiples and the risk of potential future volatility in the stock market is Exhibit 6 shows that the current value of households’holdings of equities ($55.6 trillion) relative to their total While such readings do not mean a crash is imminent,they suggest that future returns are likely to be lower.Why? Because if an equity return is the sum of the divi-dend yield, inflation, real earnings growth, and a changein the P/E multiple, then it would suggest that there isnow very little room for further multiple expansion to This increase has been a result of the rapid appreciationof the equity market and what we suspect is likely to be asecond factor: many households, put off by high mortgagerates and elevated house prices, may have logically decided Looking back at what kind of returns today’s CAPE read-ing has been associated with in the subsequent 10 years issobering. Exhibit 5 plots the CAPE ratio against the subse-quent 10-year real CAGR. It suggests that the current CAPE Private Sector Balance Sheets Are in Good ShapeWhile equity valuations are elevated and household exposure to the equity market is high, their debt levelsare extremely low across all standard metrics (exhibit 7).Similarly, cash levels or total liquid assets (e.g., deposits and William Blair to zero and beyond, and the private sector was still reluc-tant to borrow. Valuations Are Being Skewed by the Largest StocksIt is also noteworthy that the aggregate stock market’s valuations are being very heavily skewed by largest-capcompanies in the index, i.e., the Mag 7. Exhibit 10, forexample, shows that the S&P 500 P/E based on 12-month Moving even further down the market cap spectrumreveals even lower multiples, with the S&P 600 the mostattractive it has been since the late 1990s relative to thelarge caps (exhibit 11), consistent with the view that this This suggests that while equity markets have been ris-ing, they have not been accompanied by a major privatesector credit boom (the special sauce that typically turnsa mild downturn into a recession or depression). As aresult, the private sector is well placed to absorb volatil- William Blair Marrying the Numbers and the NarrativeAs Professor Aswath Damodaran likes to say, valuation is not a science, it is an art; and it is a blend between the Focusing entirely on the numbers and ignoring the narra-tive gives the illusion of precision: just because somethingis quantified does not mean it is accurate or meaningful;the illusion of objectivity: all valuations are biased, andnumbers can be used selectively to support preconceived Damodaran tells us that without a guiding narrati