Economic Crisis Analysis 2: The Internet Bubble in 2000

In 2000, compared to 2008, the market value of Nasdaq was 6.6 trillion, while the real estate market value was 30 trillion, more than twice the GDP. Additionally, the impact of housing affects everyone, while the stock market only affects a portion of the population. Therefore, the bursting of the stock market bubble in 2000 had little impact on the real economy.

Furthermore, the current bubble level is far from that of 2000. As can be seen from the chart below, the Nasdaq 100 forward PE ratio reached 100 times in that year, while now it is only 25 times.

Another perspective is the S&P PE ratio. The current PE ratio looks similar to that before 2000, but I believe the overall valuation of the stock market has shifted upwards, as interest rates have been consistently declining since the 1980s, leading to an increase in PE ratios.

Looking at the S&P dividend yield minus the 10-year Treasury bond yield, it can be seen that it is relatively higher now compared to 2000, indicating that the bubble is not as significant as it was back then.

Conclusion: Although the current stock market valuation is not low, it cannot be considered significantly overvalued.

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