The News
The US stock market, which just posted its best September in 15 years, is “priced for perfection” and likely to disappoint, says Vanguard’s No. 2 executive. The $11 trillion firm has lowered its expectations for stock returns over the next decade to as little as 3.3% — worse than you’d get from a bucket of corporate bonds.
“There’s a lot of great news priced in” to US stock prices, Greg Davis, Vanguard’s president and chief investment officer, told Semafor.
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The S&P 500’s price-to-sales ratio hit an all-time high of 3.3 in September, meaning that investors’ enthusiasm for companies is outpacing that of their customers. That metric topped out around 2 during the dot-com boom, and at just over 3 during the pandemic’s frothy markets and muted economy.
It’s not just AI hype: As Bloomberg columnist Jonathan Levin noted recently, red-hot Walmart and Costco, both more richly valued than Nvidia on a profits-per-share basis, remain “one of the market’s great valuation mysteries.” And it’s not just the US: The 15 largest global stock indexes are all overvalued or expensive on 10-year lookbacks.
