Wednesday, 8 May 2013

Approaching Bubble Territory: Wilshire 4500 to GDP Ratio Hits New All-Time High!

Here is some news that appears to have eluded financial reporters: On Monday the Wilshire 4500 Total Market Index compared to the most recent quarter annualised GDP hit the highest level ever recorded, even beating the previous record from Q1 in 2000.

The same ratio, but based on 10-year average GDP, is now slightly higher than it was in Q2 2007, but remains lower than Q1 2000.

After the peaks in the ratios in Q1 2000 and Q2 2007, the U.S. stock market (and most other stock markets) plummeted. We are now at one of those peaks once again, and what do you know, we are approaching the end of another seven year cycle (2000 to 2007, 2007 to 2013/14?).

Yet another sign the U.S. stock market is becoming richly valued and approaching "bubble" territory.