09
Nov
Irrational exuberance or just excessive optimism?
Extreme valuation of the S&P 500 (PE 22x). Risk premium once again irrational. Historic volatility at its lowest since 2007. Tax reform failure could make Wall Street plummet.
Key Points
- Irrational exuberance or just excessive optimism in the short term?
- Extreme valuation of the S&P 500 in 2017
- The GAFAs and Microsoft accounted for 61% of the rise in the S&P 500 in October
- Implied volatility points to high levels of complacency and risk
- The contraction of the risk premium on interest rates demonstrates irrational confidence
- Ongoing indifference to political, geopolitical and institutional risks
- Economic forecasts are perhaps already too optimistic
- Keep a close eye on the economic surprises index
- Failure of, or even a delay in adopting tax reform could cause Wall Street to nosedive
