Stocks Are at A High. Labor Participation Is at A Low.
Whether one measures EV/Revenue multiples, EV/EBITDA multiples, Stock Market P/E multiples or various other measures there is no doubt the market is frothy and that certain sectors are firmly in bubble territory. Two trends are troublesome. The first is that the Market Cap to GDP ratio (measured by the Wilshire 5000 index to Nominal GDP) is at a high, well ahead of the manic 1999 early 2000 period. Second, labor force participation has been trending lower over the past 20 years. Advances in technology and automation can only absorb so much unemployment. Click the chart below to launch our brief presentation.