Current Market Valuation: No Signs of Overvaluation
The stock market is currently not in a state of overvaluation, but according to expert opinions and statistical indicators, it lies within a normal valuation range.
Indicators for the Current Valuation
The MSCI ACWI, a global stock index, shows a price-to-earnings ratio (P/E) of 22 and a forward P/E of 18.6. These values are within the historical average range, with the forward P/E fluctuating between 15 and 20. The median over the last ten years stands at 17.3, and the price-to-book ratio (P/B) is slightly below the ten-year median of 2.2, at 2.0.
The Swiss investment bank UBS considers the current bull market to be not yet exhausted. Typically, such phases last about 6.6 years with average annual returns of around 18%. Comparisons to the bull market starting in 1987 show parallels regarding innovative technologies and a long duration of over twelve years.
Although Morningstar identifies some German stocks as undervalued or overvalued, this does not indicate a general overvaluation of the market.
Warnings and Risks
High valuations, especially for US stocks, could lead to corrections, and exchange rates also pose risks. A strong euro can burden the returns of German investors in US assets.
Conclusion for Investors
Despite a recovery since April, the market is not overheated according to valuation measures, making private investment still appear attractive. However, investors should be aware of the typical risks and diversify their portfolios.