Dollar Bear Market and U.S. Stock Bubble
BoA's Hartnett analysis points out that the dollar bear market and the U.S. stock bubble are key themes for future investments. The U.S. government needs to experience 25/26 years of prosperity to reverse the trends of debt and deficits. Global investors are avoiding long-term government debt and turning to overvalued stocks and credit bonds. The dynamic price-to-earnings ratio of the S&P 500 index is 22.5 times, the static price-to-earnings ratio is 27.4 times, the dynamic price-to-earnings ratio of the MSCI index is 14.7 times, and the spread of U.S. IG A+ credit bonds is 64 basis points
BoA's Hartnett on the analysis of the dollar bear market and the US stock bubble/recession:
The US government needs 25/26 years of prosperity and bubbles, which is the simplest way to reverse the trend of US debt and deficits. This is why a long-term dollar bear market is a clear investment theme heading into 2026, and why global investors continue to avoid long-term government debt in favor of historically expensive stocks and credit bonds.
The dynamic price-to-earnings ratio of the S&P 500 is 22.5 times... the 95th percentile since 1988,
The static price-to-earnings ratio is 27.4 times... the 98th percentile since 1900,
The dynamic price-to-earnings ratio of the MSCI index (excluding the US) is 14.7 times... the 92nd percentile since 2006,
The spread of US IG A+ credit bonds is 64 basis points... the 98th percentile over the past 30 years.
