MARKETS LOOK TOPPY, GOLD LOOKS TIRED—HERE'S HOW TO STAY INVESTED SMARTLY

Market chatter has turned cautious, with many experts warning that a correction in equities and gold may be around the corner.

- JOYDEEP SEN

Such alerts deserve attention—but not alarm. After all, timing the market is nearly impossible.

Experts typically look at valuations, long-term trends in assets like stocks or gold, and what's driving the current rally. These clues can hint at where markets might head next—but not when.

So, what do the fundamentals tell us right now?

Stretched US valuations

Valuations of the US equity market are stretched, The conventional perspective to valuation is price to earnings (PE) ratio-how many times multiple you are paying in terms of price, for one year’s earnings per share (EPS). The way analysts look at it is, current PE ratio, long term average, and how far away the current PE is, from long-term average. On this parameter, US equity market is overvalued, Apart from this, there is a different macro perspec tive to gauge the valuation.

The US equity market's valuation now looks increasingly stretched. At about $64 trillion, it makes up 50% of the global market cap of $128 trillion, But its GDP, at $29 trillion, accounts for only 26% of global GDP. In other words, US market capitaliza tion far exceeds the size of its economy.