In the German financial scene in particular, in view of the expansive monetary policy pursued in many countries with regard to asset prices, the expression: “Everything is a bubble.” What is meant is the conviction that prices for stocks, bonds, real estate, collectibles and other investments as a result of monetary policy are actually not fundamentally justified and are therefore completely excessive speculatively.
These investments are actually only bought because bank balances and secure bonds are no longer profitable.
Investors who have orientated themselves to these assessments in recent years and kept their money in their bank account instead of investing in the stock market, for example, have missed considerable price gains.
Incidentally, quite a few advocates of the “everything bubble” philosophy have bought shares or real estate themselves.
Are the share prices really excessive speculatively and far removed from any reasonable valuation?
After all, the Dax passed the 16,000 point mark for the first time in its history on Friday.
A traditional valuation criterion for the stock market is the ratio of prices to expected corporate profits, the so-called price-earnings ratio.
Based on the corporate profits for the Dax estimated for the years 2021 and 2022, it amounts to values between 14 and 15.
For the German stock market, these are certainly not low in historical comparison, but neither are they completely exorbitant.
And compared to indices for technology stocks, the Dax looks downright cheap.
This assessment expresses the opportunities and risks of an economy that has so far been very strong in an international comparison, but also faces difficult challenges.
If the German economy manages to get through the adjustments associated with climate policy, today's share valuation may turn out to be very cheap.
It is not certain.
But the always uncertain future is traded on the stock exchange.