Is the US Stock Market in a Bubble?

Stock prices, especially those of tech companies like Apple and Amazon, are high, but price/earnings ratios are not excessively so

John Rekenthaler 08 May, 2018 | 10:19
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Apple iPhone X

No matter what reasonable valuation measure of US stock market valuation that one selects, it will show prices to be high. Major global technology stocks could be overpriced. But bubbles don't immediately pop. Sometimes they linger for several years. Justice does not always come swiftly.

One common valuation measure is forward-looking price/earnings (P/E) ratio. Morningstar calculates that figure by dividing 1) share price by 2) forecast earnings for the current financial year. These results can then be rolled up to give a stock market's aggregate figure.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Amazon.com Inc3,392.49 USD0.49Rating
Apple Inc148.85 USD-0.31Rating

About Author

John Rekenthaler  is vice president of research for Morningstar.

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