Stocks Are The Most Overpriced In 100 Years | Danielle Park

Extremes are called "extremes" for a reason... because they revert

Today's guest expert wrote in her latest newsletter:

"This month, animal spirits surged on bets that artificial intelligence and central bank rate cuts can solve the problem of spreading insolvency."

She is highly dubious that they can.

And if indeed they cannot, what then lies ahead for the economy, for the markets, and for investors?

To find out we'll hear it straight from her directly. We have the good fortune to welcome Danielle Park back to the program.

Danielle is president and portfolio manager for Venable Park Investment Counsel, Inc, where she manages $millions for some of Canada’s wealthiest families. She's also proprietor of the daily financial website JugglingDynamite.com.

She notes that stock prices have never been this high relative to GDP, and equity risk compensation is at 100-year lows.

Extremes are called "extremes" for a reason... because they revert. Be cautious if you’re long this market, she warns.

For a chart-rich explanation why, click here or on the video below:

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Adam’s Notes: Danielle Park (recorded 11.4.24)

EXECUTIVE SUMMARY:

• Danielle highlights the U.S. national debt reaching an unprecedented $36 trillion, a quadrupling since 2007, while GDP only increased from $17 trillion to $24 trillion in the same period. This disparity in debt versus income growth puts significant financial strain on households and businesses. Danielle mentions that average credit card debt per person has surged to approximately $6,500, reflecting a heightened reliance on credit as disposable income shrinks.

• The Fed’s policy rate has risen from 0.4% in 2016 to 5% today, drastically increasing the cost of servicing debt. This higher "cost of carry" erodes cash flow and disposable income for both households and businesses, limiting spending capacity and amplifying financial stress, particularly in sectors with substantial debt exposure, like housing and auto loans. Danielle suggests this rising cost could lead to widespread economic repercussions, potentially deepening existing financial challenges.

• U.S. job growth has been heavily driven by government employment, with private sector growth shrinking. Danielle points out that if government hiring is removed, overall employment would show net losses. Canada shows similar trends with reduced labor force participation and shrinking work hours, indicating both economies' heavy reliance on fiscal policies and government spending for stability, which may not be sustainable long-term.

• Current S&P 500 valuations are historically high, trading at approximately 35 times forward earnings, with the top tech companies comprising nearly a third of the index. Danielle warns that such extreme valuations, reminiscent of the 2000 tech bubble, expose investors to heightened risks. She stresses that