Damodaran doesn't think stocks are expensive, but he doesn't think they are cheap either.
He feels there are four reasons the recent optimism is justified:
- record amounts of cash flows
- robust earnings growth
- low interest rates
- risk premiums are coming down
And he has two main worries:
- possibility of rising interest rates
- there is always another macro crisis around the corner
He is especially worried about how fast interest rates could rise if the economy starts to heat up.