Are stockmarkets in a bubble

HAVE investors become irrationally exuberant' That is the biggest question hanging over global stockmarkets. Despite tumultuous politics across much of the rich world, share prices are reaching ever loftier heights. After breaking the 20,000 barrier in January, the Dow Jones Industrial Average swiftly passed 21,000 earlier this month. In Britain the FTSE 100 has been notching up fresh records, too. The MSCI World Index has hit an all-time high.At first sight, the warning signals are flashing. The recent flotation of Snap, an internet firm that is yet to make a profit, brought back memories of the dotcom boom; its shares soared by 44% on their first day of trading (although they have fallen back since). By historical standards, valuations in the American market are worryingly dear. The cyclically adjusted price-earnings ratio, which averages profits over ten years, is just under 30, according to Robert Shiller of Yale University. Only twice has it been higher'in the late 1990s, during the internet boom, and just before the crash of 1929.There are three reasons why investors are ignoring the alarm bells, each of them reasonable....Continue reading
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