The Federal Reserve stated in its recent monetary policy meeting minutes that valuations in some asset classes "seem elevated," and the market's pricing of risks associated with overvalued tech assets remains relatively loose.

The S&P 500 Shiller price-to-earnings ratio is approximately 42.5 times, close to the 44.2 times peak during the 1999 internet bubble; this metric measures current stock prices against inflation-adjusted earnings over the past decade, reflecting that market prices have significantly outpaced long-term earnings bases.

The rise in U.S. stocks is concentrated among large tech companies related to artificial intelligence, with investors continuing to assign higher valuations to long-duration growth assets based on expectations of future productivity improvements, increased corporate software spending, and expanded demand for computing power; however, this also makes prices more sensitive to downward adjustments in earnings expectations.

The Federal Reserve did not directly define high valuations as systemic risk in the meeting minutes but used the phrase "some asset classes are overvalued"; this wording indicates that policymakers are monitoring asset prices in relation to financial stability risks.

The Nasdaq Composite Index closed at 26,289.71 points on August 18, remaining in a high range. High valuations do not automatically mean an immediate market reversal, but when risk-free interest rates, earnings growth rates, or AI capital expenditure expectations reverse, valuation compression can amplify stock price volatility.

Market mechanisms show that funds are primarily flowing into high-duration assets such as large-cap tech, semiconductors, cloud computing, and AI infrastructure, with buyers mainly consisting of passive index funds, growth-oriented funds, and allocations chasing AI themes; if earnings realization lags behind valuation expansion, funds will first withdraw from high-valuation, low free cash flow assets, benefiting defensive sectors, short-duration assets, and high-rated bonds.

Source: Public Information