Market Getting Into Bubble Territory, for Sure, Yardeni Says

Watch Market Getting Into Bubble Territory, for Sure, Yardeni Says - Bloomberg on Dailymotion

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00:00Two-par question. What's a bubble and what is this?

00:04Well, at this point, I think we're getting into bubble territory for sure. We've got the forward

00:09P.E. of the S&P 500 around 23. And the peak during the previous tech bubble in the late 1990s

00:19was 25. So we're getting close. But, you know, the earnings story has been phenomenally strong,

00:26particularly this year in the first and second quarters. Who would have thought with all the

00:31commotion coming out of Washington? And it looks as though the third quarter earnings season,

00:37which is about to start, is going to be very strong as well. We're expecting 10% year-over-year

00:41percent change. So the earnings are actually there to continue to drive this bull market higher.

00:49But I wouldn't want to see the valuation multiple go any higher than it is right now.

00:53And that earnings story, part of the reason, part of many reasons why a lot of people are

00:57still looking for the potential melt-up. Typically, a melt-up is a risk people want to own. Is it a

01:03risk you want to own? And are you willing to keep your bets on this market quite concentrated to take

01:08advantage of it? Well, you know, I think it hasn't been all valuation. The reality is, again,

01:14it's been an earnings-led melt-up, which is fine. I don't have a problem with that. And that's really

01:21not a melt-up. The fundamentals are actually there. And oh, by the way, if this whole AI thing turns

01:27out to be a lot of hype and the companies that are spending all this money on AI infrastructure

01:35have to kind of slow it down, and it's not exactly the end of the world. I mean, these companies are

01:40using cash flow to finance this. It's not like 1999, where telecommunications companies did seller

01:47financing, and there was a tremendous amount of debt, because to do that, they borrowed in the

01:51junk bond market. So there's a lot of credit in the bubble back then. This time around, it's cash

02:00flow. And if they have to slow it down, their profits are suddenly going to look even better.