New World Invesment Research

The CAPE ratio, which is based on average inflation-adjusted earnings from the previous 10 year, continues to hover around all-time highs at 40.8.

This indicates that a substantial degree of optimism around future earnings is already priced into the market, with more limited, but not exhausted, upside. Despite this, U.S. equities, particularly AI-related companies and sectors, continue to rally. This suggests that investor optimism around AI is broadening beyond a narrow group of firms, extending to hardware and software providers as well as upstream and primary-sector players.