B. Riley’s Paul Dietrich believes the stock market is in a bubble.
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Despite the gains so far this year, some analysts believe a stock market crash is imminent. In fact, Paul Dietrich, chief investment strategist at B. Riley, said: S&P 500 If the bubble bursts and a recession takes hold in the country, stock prices could fall by as much as 48%.
Dietrich believes the stock market is currently significantly overvalued, and he predicts that as taxes rise and inflation and interest rates remain high, the US economy will fall into a devastating recession.
“Any future downturn will likely result in a deeper stock market decline than we saw in 2000 or 2008,” Dietrich said in his monthly comments in June.
Dietrich believes that stocks are currently significantly overvalued, with both the S&P price-to-earnings (P/E) ratio and the inflation-adjusted Shiller P/E ratio at “multidecade highs,” signaling that a bubble may be brewing. Indeed, Dietrich believes that artificial intelligence (AI)artificial intelligenceThe dot-com bubble in the early 2000s led to rapid growth in the United States.
Dietrich looks at stock market crash indicators
As Business Insider Dietrich also addressed the state of the Buffett Index, which recently hit a two-year high of 184%, further suggesting that the market is overvalued. The Buffett Index is the sum of the market capitalization of actively traded U.S. stocks divided by the most recent quarterly Gross Domestic Product (GDP) estimate. This helps gauge the value of the stock market relative to the size of the economy.
Dietrich believes the economy and markets have been artificially propped up by near-zero interest rates throughout much of the pandemic, and he argues that rising interest rates, along with government tax hikes to address spiraling budget deficits, would cause an economic recession.
“No one seems to realize that the economy is cooling and there are economic risks everywhere,” Dietrich said. “I still think it’s likely that the economy will fall into a mild recession this year.”
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in the article. The opinions expressed in this article are solely those of the author, which is subject to InvestorPlace.com’s copyright. Publication Guidelines.
