The Market has been on an absolute TEAR.... a bubble ready to pop? Or not?

[Happy Hoosier]

It feels like it cannot last. But I thought it wasn't sustainable a couple weeks ago... but here we are.

I don't want to miss this rally. While trying to see where the top of this is so maybe I can avoid the worst of the tumble, without sacrificing the benefit of the rally too much. I ran across a guy who has the theory of the "melt up."

Essentially, he thinks the bubble will continue to infalte for a few years. Ultimately, he thinks the Fed will had to "manufacture" a crisis to pop the bubble in a controlled way, and there is a big market reset.

Some of the data matches, some don't. Not sure I buy it.

Another possibility is a valuation reset. Lots of folks predict a "bubble pop" because P/E vales are so much higher than in the past. But Scott Galloway thinks that passive index investing might simply be permanently increasing the nominal P/E value. If we look at this chart: https://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-earnings-chart we see a pretty steady rise in the P/E ratio since about 1980. The first Vanguard low-cost index fund was approved in 1976. Coincidence? Maybe. But consider that the modern 401K began in 1981. That starts looking like LESS of a conincidence. I think that low dollar retail investors such as myself investing their 401K dollars are attracted to the low-cost index funds. The more recent acceleration is, IMO, at least in part to 401K's having better investment options, including more access to low cost funds.

Anyway, a long way to say that while I do think the market is likely to pull back from the RECENT rally, I am NOT convinced it is actually in a unsustainable bubble. P/E is not a fundamental perfromance metric, but rather a measure of value to buyers, and these days, buyers value stocks higher than they have in the past.

Thanks for coming to my TED talk!