Complacency

Equity markets keep printing all time highs on the heels of Tech earnings reports. Investors are showing a big dosis of complacency a consequently, valuations keep climbing up as well as concentration levels. Perhaps the simplest indicator to show market overvaluation is the one showed in the chart below, that prints total market cap of U.S. equities, divided by U.S. GDP. It’s known as the Buffett indicator and it si now also at an all time highs. This indicator usually normalizes when there is a market correction, since it’s very difficult for GDP to spike up agreesiveky unless there is a paradigm shift. Is that possible through AI? Maybe. Is that imminent? Tech CEOs

Keep telling us that the pace of advancement in AI is picking up and that we may reach AGI levels pretty soon. Sooner than expected. But even with that, investors expectations typically stretch beyond rational scenarios and there needs to be a correction to put things in perspective and let the market normalize. We’re at that juncture.

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