Veteran economist drops surprise verdict on the S&P 500

Core Insights - The S&P 500 has experienced significant gains, currently up 12% year-to-date, driven largely by AI-fueled megacap stocks, particularly the "Magnificent 7," which now represent one-third of the index's value [1] - Economist David Rosenberg warns of a "gigantic price bubble" in the U.S. stock market, indicating that extreme valuations may lead to negative returns in the near future [4][5] Valuation Concerns - Rosenberg highlights the S&P 500's Shiller CAPE ratio at approximately 37.5, marking it as the third-highest level ever recorded, suggesting a euphoric market state [5] - Historical data shows that when the CAPE ratio exceeds 35, one-year returns have typically turned negative, indicating a fragile market environment [6] Labor Market Indicators - The labor market is showing signs of cooling, with job growth recently falling below 100,000 per month and a significant downward revision of 911,000 in prior payrolls [7] - Initial jobless claims are reported at 263,000, surpassing Rosenberg's "danger zone" threshold of 240,000, which could signal further economic challenges [7][8] Market Monitoring - Investors are advised to closely monitor the elevated CAPE ratio, jobless claims above 240,000, and the narrow breadth of the megacap-led market rally [8]