Higher Rates Could Burst The S&P 500 Bubble

Damir Tokic 14.67K Followers Follow Summary The S&P 500 is trading with a Shiller PE reading of 42, just below the record high level reached at the peak of the 2000 dot-com bubble. The Fed committed a policy error by easing prematurely, and now it needs to reinvert the yield curve to curb rising inflation - this could burst the bubble. If the Fed commits another policy error now and acts too slowly, long-term rates could rise sharply, which could also burst the bubble. Chip Somodevilla/Getty Images News The Bubble The S&P 500 ( SP500 ) is trading near the highest valuation multiple ever, based on the Shiller PE ratio currently at 42, just below the all-time high at 44 during the peak of the dot-com bubble in 2000. Other valuation metrics This article was written by Damir Tokic 14.67K Followers Follow Commodity Trading Adviser (CTA), member of National Futures Association. Professor of Finance, research on Global-macro issues. Editor-in-Chief, Journal of Corporate Accounting and Finance. Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.