Part 2/7:
The current investor enthusiasm mirrors sentiments from the late 1990s, right before the dot-com bubble burst. While headlines celebrate soaring stock prices, a deeper analysis reveals alarming signals that should be of concern. The Cape Ratio, an essential tool for assessing market valuations developed by economist Robert Shiller, offers crucial insights. Unlike traditional Price-to-Earnings (PE) ratios that focus on last year's profits, the Cape Ratio evaluates an average of the last ten years. This conservative measure highlights that stocks are experiencing severe overvaluation.