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Margaret Moran
Margaret Moran
Articles (208) 

David Tepper: This Is the Most Overvalued Stock Market Since ‘99

The founder of Appaloosa Management comments on overall market valuation

May 13, 2020 | About:

On May 13, David Tepper (Trades, Portfolio), the founder of Appaloosa Management, commented on the state of the U.S. stock market on CNBC’s “Halftime Report.”

Asked whether he agreed with Stanley Druckenmiller (Trades, Portfolio)’s statement that the risk-reward ratio was the worst he’s seen in his career, Tepper described the stock market as “maybe the second-most overvalued stock market I’ve ever seen… I would say ’99 was more overvalued.”

The guru did say that prices were a little less risky after the Wednesday selloff, but that he still saw these valuations as high, saying that “the market is, by anybody’s standards, pretty full.”

He also pointed out that the Fed had put a lot of money into markets, contributing to optimism and higher valuations. Thus, some Big Tech stocks such as Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL) may be “fully valued.”

The Shiller price-earnings ratio, a measure of overall stock market valuation, stands at 26.4, which is 55.4% higher than the historical mean of 17. This seems to support the claim that the stock market is overvalued, as buying at this ratio implies an average future return of 0.4% per year. The Shiller P/E ratio reached its historical high of 44.2 on Dec. 1, 1999.

Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the regulatory filings for the quarter in question and may not include changes made after the quarter ended.

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