The market’s biggest asset undervalued: stocks.
The price of stocks is currently trading at about $1,300 per share, according to Morningstar, which measures the value of a stock based on its price at the end of the day.
That means the price of the benchmark S&P 500 index is down about 15 per cent in the past 24 hours.
Even if the stock market continues its downtrend for another three months, the S&s are worth about a third of what they were in late January.
Stocks are trading at an average of $1.3 trillion, but that is only slightly below the $2.2 trillion mark, according the latest data from Bloomberg Intelligence.
“The stock market is still going to be up and up, but it will be up by a lot more than the average earnings of a typical American worker,” said Jason Blanchard, the chief economist at Credit Suisse in New York.
It is also worth noting that the average annual wage for Americans in the labour force is just $47,000 a year.
Investors are betting that stocks will continue to surge, despite the stock markets’ decline, as a result of the US Federal Reserve’s decision to increase its stimulus.
In a note to clients, the investment bank added that “the stock market has been in a very strong rally over the past month, with the Dow closing up more than 800 points and the S+P 500 closing at a record high of 6,973.”
In contrast, a report released by the US Bureau of Labor Statistics earlier this week showed that the US economy was contracting in January, which was more than double what it was in February.
According to the report, the US unemployment rate is now at 4.6 per cent, up from 3.3 per cent a year ago.
Since the start of the year, the unemployment rate has increased by more than 400,000 jobs, or 1.9 per cent.
And while some economists think the Federal Reserve may raise interest rates in February, others say it might not.
Fed Chair Janet Yellen told the US Senate on Wednesday that she has been looking at ways to stimulate the economy, but she added that she does not expect to raise rates any time soon.
For now, the Dow is trading at a very high level, which is an asset undervaluation.
This story has been updated to reflect the latest news.