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Five signs of market excesses: What dangers lurk beneath the record highs?

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  Print publication without navigation Published in Stocks and Investing on by El País in English
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Despite the high valuations, the U.S. stock market is still acting as a magnet for investors seeking opportunities (and often ignoring the risks)
The article from El País discusses five signs of market excesses that could signal underlying dangers despite the record highs in stock markets. Firstly, overvaluation is evident as the S&P 500's price-to-earnings ratio is significantly above its historical average, suggesting stocks might be overpriced. Secondly, speculative bubbles are forming, particularly in sectors like technology and cryptocurrencies, driven by FOMO (Fear Of Missing Out). Thirdly, low volatility in the market, which might indicate complacency among investors, often precedes sharp corrections. Fourthly, high levels of debt among corporations and consumers could lead to financial instability if interest rates rise or economic conditions worsen. Lastly, discrepancies between economic indicators and market performance show that while markets are soaring, economic fundamentals like GDP growth and employment rates are not keeping pace, hinting at a potential disconnect. These signs collectively suggest that while markets are at record highs, there are significant risks that could lead to a market correction or crash.

Read the Full El País in English Article at:
[ https://english.elpais.com/economy-and-business/2024-12-09/five-signs-of-market-excesses-what-dangers-lurk-beneath-the-record-highs.html ]