Stock prices are not going to stay this high. Everyone can see that we are in a stock market bubble that does not have any parallel in all of U.S. history, and everyone can see that the end of that bubble is approaching. The only debate is about how fast and how far the eventual fall will be. For the first time ever, the ratio of U.S. stock prices to U.S. GDP has reached 200 percent. In other words, the total value of U.S. stocks is now twice as high as the value of all U.S. economic output for an entire year. To get an idea of how crazy this is, just check out this chart. Historically, the ratio of U.S. stock prices to U.S. GDP is normally under 100 percent, and so if all stock prices were cut in half U.S. stocks would still be overvalued. That is how extreme this bubble has become.
…as of Feb. 3, the Shiller P/E for the S&P 500 was knocking on the door of 35 — more than double the long-term average. To put this figure into some context, there have only been five periods in history where the Shiller P/E ratio topped 30 and stayed there during a bull market run. Two of these events — the Great Depression and dot-com bubble — led to some of the biggest pullbacks ever witnessed in equities. Two other events (not counting the current move) occurred within the past three years, delivering declines of 20% and 34%, respectively, in the S&P 500.
Basically what this is saying is that if stock prices fell by half, the Shiller P/E for the S&P 500 would still be above the long-term average.theeconomiccollapseblogExperts Are Warning That A U.S. Stock Market Crash Is Very Likely In The Months Ahead