“Fears of an erratic US government have skyrocketed” according to Fed research
“Stocks historically overvalued outside of three bubbles.”
It literally spells it out right there.
Stocks way too expensive and still uncorrected while geopolitical FUD is at ATHs.
It’s actually very interesting data – if you look at the bubbles, you’ll see irrational optimism/very little fear during the first half of the valuation spikes before a much sharper fear spike with the bubble collapse compared to the valuation chart. The broader spikes in valuation captures both the valuation spiralling out of control (the first half of the spike) and the extended holdouts after revenues crash before valuations finally bottom out and reflect reality and revenues start recovering. Usually the fear is a trailing indicator once the market has already turned.
In this case, we have a very different situation: FUD has spiked to ridiculous level with no drop in high valuations. Trump bulls holding out hope for another Trump bubble so continue to invest in a situation that could quickly get out of control when the consequences of his policies start coming home to roost.
I want to be able to sleep at night without my life saving being tied up in whether an increasingly erratic and power-mad Trump and his well-stocked choir of sycophants got out of bed and decided to invade Canada today because Justin Trudeau said something mean on X.