Is the stock market bubble over?
Dr. Jacques Saint-Pierre, Adjunct Professor of Finance at Laval University & Board Advisor
Wednesday, February 14, 2018
No.For two reasons. Even if the stock futures are positive and the VIX is low, the market is still overvalued and the term structure is on its way to become flat (the short part is increasing). Now, we move from algorithmic induced trading (the correction days from 1/26/18 to 2/8/18) to fundamental trading. The 40% of the DJIA that is overpriced needs to come back on the dynamic equilibrium diagonal line in the space made by the two fundamental components Market Value/Intrinsic Value and Return on Capital/Cost of Capital.
To learn more on this concept, please read
An Important Predictor of Market Bubbles, Crashes and Corrections (June 6, 2017). Available at SSRN: https://ssrn.com/abstract=2981745