B. Riley's Paul Dietrich Thinks Stocks Are in a Bubble
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Despite gains for the year so far, one analyst believes a stock market crash may be imminent. In fact, Paul Dietrich, chief investment strategist at B. Riley, believes that S&P 500 could sink up to 48% when the bubble bursts and a recession takes hold in the country.
According to Dietrich, the market is currently massively overvalued and he predicts that as taxes rise and inflation and interest rates remain high, the U.S. economy will plunge into a devastating recession.
"I believe the next recession will result in a deeper stock market decline than we experienced in 2000 and 2008," Dietrich said in his June report. monthly comment.
Dietrich believes that the S&P price-to-earnings (P/E) ratio and the inflation-adjusted Shiller P/E ratioโboth at โmulti-decade highsโโsuggest that stocks are massively overvalued right now, which could indicate an ongoing bubble. In fact, Dietrich compared speculation around artificial intelligence (AI) with the dot-com bubble of the early 2000s.
Dietrich focuses on indicators of falling stock market
As Business Insider Dietrich also reportedly highlighted the state of the Buffett indicator, which recently hit a two-year high of 184%, further indicating overvaluation in the market. The buffet indicator It uses the combined market capitalization of all actively traded U.S. stocks divided by the latest estimate of quarterly gross domestic product (GDP). This helps measure the value of the stock market relative to the size of the economy.
Dietrich believes the economy and market have been artificially propped up by interest rates near 0% for much of the pandemic. He argues that higher interest rates and the government raising taxes to address a rapidly rising budget deficit are a recipe for an economic recession.
โNobody seems to realize that the economy is cooling and here they are risks to the economy โeverywhere,โ Dietrich said. โI still think there is a strong possibility that the economy will enter a mild recession this year.โ
On the date of publication, Shrey Dua did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com's privacy policy. Publication Guidelines.
