Is Market In A Bubble

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Is Market In A Bubble

Is The Us And Uk Stock Market In A Bubble?

The S&P 500 and the FTSE 100 continue to make new highs. So, it's only natural to wonder if the US and the UK stock markets are in a bubble that's just waiting to be burst?

According to analysts, the valuations from both markets look stretched. However, it's not that widespread and is only limited to some sectors of the stock market.

Higher Valuation Of Stocks

One such example is the Palantir stock, which is trading at a P/S ratio of almost 120! But once again, the same can't be said about the other stocks in the US and the UK markets.

If we talk about valuations alone, the S&P 500 and the FTSE 100 are trading at high P/E multiples. In fact, such a high multiple was not seen in the last few years.

This is a sign that the share prices have increased a lot, while the profits didn't increase as much during the same period. This equation alone tells us that the stock markets are now overvalued.

But it doesn't mean a crash is just around the corner now. In fact, there are many good stocks which are still affordable in a market like this.

Also, there's no rule that stocks with low P/E multiples will just jump higher instantly. Just like that, a higher P/E ratio doesn't mean the market will crash the next day. Things like these can take time, and it can be weeks, months, or even years.

That's why it is safe to say that there will always be some shares which are overvalued or undervalued. So, what's important is to pick the right type of shares to buy.

So, while the markets are at record highs, you can still enter the market by picking undervalued shares. This will lower your risk and exposure even if the markets go through a healthy correction.

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