The Bubble That Does Not Burst

Stock markets are overvalued, but neither interest rates nor unrealistic expectations pose a threat to prices

A trader wears a Dow 22,000 points hat on the floor at the closing bell of the Dow Jones Industrial Average at the New York Stock Exchange on August 2, 2017 in New York. BRYAN R. SMITH/AFP/Getty Images

For years, pundits have been warning of a stock market bubble and its inevitable bursting.

The reasoning behind such predictions is simple. Western economies have grown at a modest pace, restraining the profit-making ability of large corporations. Moreover, inflation has remained low, even though the West and Japan have engaged in expansionary monetary policies.