Stock Market Bubble: Valuations At 'Nosebleed' Levels, Expert Says

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A renowned market bear who called the dot-com crash warns stock valuations are at 'nosebleed' levels — and suggests that tech stocks could be the market's 'Achilles' heel'

He highlighted a gap between near-term and long-term growth expectations.Earlier this week,— who was the most accurate stock market forecaster among major Wall Street strategists in 2022 — again sounded the alarm bell for stocks.

"I think Michael Wilson is right," Edwards, who called the dot-com crash at the turn of the millennium, said in a note to clients."US valuations have ascended above the clouds into the thin and dangerous atmosphere of the 'Death Zone.'"24x a year ago But Edwards said another factor will likely pop valuations: the fact that near-term and long-term earnings projections are vastly disconnected. The S&P 500's 12-month forward P/E ratio is represented by the black dotted line in the chart below, while long-term expected earnings growth is in red. Here's another way to spot that difference. The chart below, displaying the price-to-earnings-to-growth ratio, shows the disconnect between the two.

 

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