The latest warning about the potential bubble in the stock market comes from Apollo Global Management Inc.‘s chief economist, Torsten Sløk, who has reportedly raised concerns about high market valuations.
A Potential ‘Reckoning’ For Market
Sløk pointed out the “Warren Buffett indicator” (U.S. stock market cap to GDP) and the Shiller cyclically adjusted price-to-earnings ratio have been increasing over time, with 2025 being an especially noteworthy outlier, reported Fortune, citing Sløk’s Thursday note to clients.
This week, the S&P was at "historically extreme valuations,” as per the analyst.
While high valuations do not necessarily indicate an imminent correction, said UBS’s chief investment officer, Mark Haefele, in a note to clients seen by Fortune. He believes that a correction could occur when corporate profit growth disappoints. He indicates that forward returns are more closely linked to shifts in earnings expectations over the coming 12 months.
Markets Waver On Valuation Worries
These warnings come amid a broader concern about the state of the market. Earlier this month, the CEOs of Goldman Sachs and Morgan Stanley predicted a 10-20% market correction within the next two years. They advised investors to prepare for a downturn and review their portfolio allocations.
These concerns have been further exacerbated by the recent plunge in global tech stocks, including a nearly 20% drop this week in the shares of Japan’s SoftBank Group (OTC:SFTBY). This has led to a significant market cap loss in the AI sector, further fueling fears of a potential bubble burst.
Moreover, the recent selloff of overbought tech stocks, led by Palantir Technologies Inc. (NASDAQ:PLTR) has erased more than $500 billion in market value in a single day, indicating a shift in investor sentiment.
Price Action
Over the past six months, the SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, climbed 19.45% and 26.56%, respectively, according to Benzinga Pro data.
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