We have already pointed out in recent months that US equities are currently heavily overvalued - yet many people are unaware of the extent of this. In fact, it is on a par with the telecoms and internet bubble in 2000: US equities are currently trading at over 90% of their valuation levels at that time, while the rest of the global market is only between 40% and 50%.

In 2000, the overall economic trends were far more positive than they are today, with the risk of recession hanging over the USA for months. So how did it come to this and have we really learned nothing from the past?

Just as in the dotcom bubble, the reason for the overvaluation today is technology. The supposedly successful product of artificial intelligence, which is primarily being developed by US technology companies, has completely captivated investors and sent share prices soaring. At the same time, companies have already invested heavily in the sector and are planning further sums, as Google and Microsoft have confirmed. This is currently creating an investment bubble the likes of which we have only seen before the well-known economic crises of the past.

The big problem is the misjudgement of investors and developers about the commercial opportunities of AIs. Historically, it has long been known that the introduction of new high technologies rarely triggered the boom that was attributed to them. Instead, the small increase in productivity they bring will hardly be able to compensate for decades of declining economic growth. This is also supported by the fact that there is no network effect between providers. Whereas in 2000, users of the new internet companies benefited if others also used the services offered by this company, with AI applications it does not matter whether many others use this model or not. The AI applications access virtually the same database, which means that you can switch to the cheapest provider. It doesn't matter how many users this AI model has.

The fact that the US equity market offers more reason for caution than prospects of success is also shown by a recent comparison of its price development with that of gold and residential real estate. These have been identical for 82 years since 1900, but since then equities have risen sharply and have risen to seven times the price level of the other two tangible assets.

But what about the structural advantages offered by the USA? On the one hand, it must be acknowledged that America has much less political uncertainty than Europe, where Putin's war of aggression in particular has triggered many doubts. At the same time, the country offers a very attractive capital market for venture capital, which has already produced many innovative companies and which start-ups here can only dream of. The comparatively low government ratio of 34% instead of 49% in the EU has also been considered a major plus so far, but the downside of this is now reflected in the exploding national debt.

This is currently at around the level of the post-war period from 1945 - with the important difference that it will not disappear along with the end of war spending. Instead, the money was used for social spending and permanent economic stimulus, the discontinuation of which would lead to enormous political and economic problems. Combined with the still high interest rates, this creates another negative factor for the US economy.

So if you don't want to hope for the success of artificial intelligence, you should take a closer look at US government bonds or look for sectors in which artificial intelligence could really lead to an increase in productivity. The healthcare sector is one example.

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Capital market outlook