The vice-president of the European Central Bank (ECB) warned Wednesday that current high valuations in U.S. equities could spark a possible correction in global stock markets.
Speaking to CNBC, Vitor Constancio said: “Certainly the cyclically-adjusted price (to) earnings ratio in the U.S. is well-above historical averages.”
This ratio is an important metric used by traders to gauge the value of stocks. The fact that they are above their usual average means that there’s the risk of a potential overvaluation in the U.S. stock market — which could potentially lead to a reversal.
“We see that some markets are overstretched or at least with indicators that are away above the historical averages,” Constancio told CNBC.
“At the same time we can see that volatility both in the equity and the bond market is very low, which experiences shows in those situations some events may trigger a sudden revision of expectations by investors,” the Portuguese banker said.
via CNBC
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Alfonso Esparza
Latest posts by Alfonso Esparza (see all)
- USD/CAD Canadian Dollar Higher as BOC Business Survey Boosts Optimism - 10/15/2018
- Oil Lower on Saudi Diplomacy and Supply Concerns - 10/15/2018
- Gold Rises as Metal Regains Safe Haven Title - 10/15/2018