Ratio that shows share prices at level well above dot-com boom
The Tobin Q ratio for US stocks has reached 2.1, significantly higher than the levels seen during the 2000 dot-com boom. While some analysts warn this suggests overvaluation, others argue the metric fails to account for modern intangible assets like software and intellectual property.
Why it matters
High valuation metrics raise concerns about potential market corrections and the sustainability of current equity prices.
New York stock exchange (file photo). Shares are trading in US stocks at a level that is higher than it would cost to rebuild the companies. Photo: MICHAEL M. SANTIAGO / AFP
The article balances the warning signal of the ratio with expert skepticism regarding its modern applicability.
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