Among their biggest questions: Just how expensive are stocks, anyway? Are they overpriced compared with likely earnings gains? What do stocks typically do when they get this pricey? What should investors do?
The answer: By a variety of measures the market is frothy. Some measures, but not all, are close to 2007 and 2008 extremes. They are far from most extremes of 2000, however. So while many investors are turning cautious, few are pulling back wholesale.
“This market isn’t bubble-level by any stretch of the imagination,” says Scott Clemons, chief investment strategist at Brown Brothers Harriman Wealth Management, which oversees $23 billion.
His worry is that with the earnings outlook tepid, the risk of a pullback is rising. Many of his clients are risk-averse, so his firm has trimmed stockholdings just in case. That kind of defensive thinking is affecting stock prices.