Bill Dudley, a Bloomberg Opinion columnist and former New York Fed President, explains why he thinks US the equity market is in bubble territory. Speaking with Romaine Bostick on &quot;Bloomberg The Close,&quot; Dudley also comments on the economic impact of AI and the rise in bond yields.<br>See omnystudio.com/listener for privacy information.

Former Fed President Bill Dudley Talks AI Bubble, Bond Yields

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[SPEAKER_02] Bill, I want to start off first with this idea of the bubble itself and sort of what the metrics you're using to, I guess, make that judgment call that this is indeed a bubble or bubble territory.

[SPEAKER_03] Well, the first thing you see is just the equity market valuations are really stretched. If you look at the Schiller-K ratio, it's at 41. The all-time high was 44 in December 1999. The average over the last 25, 30 years has been about 17. You look at the real equity risk premium, the excess return you get for holding equities compared to Treasury inflation-protected securities, 1.1 percent excess expected return.

[SPEAKER_03] Less than half the average we've seen since 2010. Look at the Buffett indicator, which is just the U.S. market cap to GDP ratio. It's currently around 240 percent. Buffett said that the stock market was at a risky point when it was above 100. So we're at 240 percent. So the first thing is just you look at valuations. And then you think about what's actually happening in the cycle. There's a huge investment boom going on in artificial intelligence. And this year we're getting tremendous impetus to the economy from that.

Former Fed President Bill Dudley Talks AI Bubble, Bond Yields

Read the full transcript

The candid version is on a podcast,
not the earnings call.

Former Fed President Bill Dudley Talks AI Bubble, Bond Yields

Read the full transcript

The candid version is on a podcast, not the earnings call.

The candid version is on a podcast,
not the earnings call.