Ex-Fed Chief Dudley Warns Stocks Are in Bubble Territory as Treasury Boosts Buybacks
Bill Dudley, a former president of the Federal Reserve Bank of New York, says the US stock market is in bubble territory, pointing to stretched valuations and a slowing artificial intelligence (AI) investment cycle. Dudley made the comments on Bloomberg Television this week, as Treasury Secretary Scott Bessent moves to contain a sharp rise in long-term bond yields. Sponsored Sponsored Stretched Valuations Underpin the Bubble Call Dudley pointed to the Shiller CAPE ratio, the Shiller cyclically adjusted price-to-earnings (CAPE) ratio, which sits near 41. That compares with a 25 to 30-year average of about 17, and a record of 44 set in December 1999. In simple terms, investors are paying far more for each dollar of company earnings than history suggests is safe. He also cited the Buffett Indicator, the ratio of stock market value to gross domestic product (GDP), which stands around 240%. Warren Buffett has said readings above 100% signal an overvalued market. This indicator is suggesting the stock market is strongly overvalued. The Buffet Indicator is pointing to a severely overvalued stock market. Image Source: Long Term TrendsAI Spending Faces a Slowdown Dudley expects capital expenditure (capex) growth among AI hyperscalers, the large cloud providers building AI infrastructure, to decelerate in 2027. That would squeeze