Steve Beeman
In August 1979, BusinessWeek published a cover story declaring “the death of stock.” This headline captured the feelings of mal lazyness endured in the 1970s. After a decade of inflation, stagnant growth and rising interest rates, the Dow went nowhere in nominal places. Americans were looking at bonds, real estate and hard assets. The stock market seems no longer a reliable place to build wealth.
Of course, history had other plans. This article appeared a few years before the dawn of the bull market of record setting.
It is worth asking if today the underlying conditions that justified that headline is back. If so, how should investors respond?
Stock valuations are historically high
The US stock market is expensive by almost all long-term metrics. The Schiller P/E ratio, or circularly adjusted price-to-earning (CAPE) ratio, is now close to 32, doubled to almost 16 historic average. That level has only been exceeded three times in 1929, 2000 and 2021 in a short period.
Unlike the 2010s, when interest rates were close to zero and liquidity was abundant, today’s environment presents a different calculation for capital allocation.
Interest rates reenter the conversation
For over a decade, investors have operated under the assumption that there is no substitute for stocks. “There is no alternative” known as Tina – the theory is true in a world where tracing was less than inflation and money was virtually free.
Those days are over. The 10-year financial yield is currently above 4%, with real yields being positive. For the first time in years, bonds offer meaningful, low-risk returns. As a result, the equity risk premium is narrowing, with investors rethinking how much they will pay for future revenues, particularly long-term growth stocks.
This alone suggests that you can enter the duration of the evaluation compression.
Inflation is less temporary than advertised
Today’s inflation does not reflect the oil shock and wage spiral of the 1970s, but remains persistent. The underlying drivers (close labor market, de-mitigation, geopolitical instability) are structural rather than cyclical. Core services inflation and shelter costs have proven difficult to contain.
The Federal Reserve made that clear: the commitment to restoring price stability is a reality. That probably means long distance interest rates. And it challenges the premium ratings that stock investors have come to expect.
<
Globalization has replaced strategic fragmentation
Since the fall of the Berlin Wall, global markets have benefited from a relatively stable US-led economic order. That world is declining. The rise of China, the expansion of BRICS, and the transformation of trade weapons have pushed capital flows into a multipolar model. “Made in America” is back. The same goes for “made in China”. There will be less intertwining across borders.
Realignment of global trade could potentially shorten supply chains, make capital more regional and reduce the benefits of once-in-a-global magnets of US stocks. This is not a sudden dismantling, but a slow, structural shift. It affects margins, valuations and ultimately portfolio allocations.
New asset classes are emerging
In the 1970s, investors were turned into gold. Today, they are exploring tokenized assets.
Tokenization – The process of digitizing the real-world assets of blockchain infrastructure introduces a fundamentally new kind of financial equipment. These assets are fractional programmable and accessible. They range from real estate and carbon credits to intellectual property and decentralized finance platforms.
It’s still too early, but the rise of tokenized markets suggests the investment universe is expanding.
What’s coming next
This does not mean that the stock is destined. But that means the assumptions that underpinned the past decade (low rates, low inflation rates, high globalization, lack of alternatives).
As in the 1970s, we could enter an assessment regime characterized by lower multiples, more choppia returns, and greater macrosensitivity. Passive investments can lose some of its luster. Stock prices, dividends, and risk management can become important again.
Stocks will not die. But the way we evaluate them, and the role they play in our diverse portfolios, is changing.
Investors need to adapt
Just as Volcker reforms in the 1980s sparked a new era of markets, today’s pressure could reset expectations and create opportunities for those looking to reconsider long-standing assumptions. That means considering real return equipment, exploring new platforms that reflect new models of value, or rotating into assets for a shorter period of time. The market is evolving. They always have it. And those who adapt rather than resist are usually those who thrive in the long term.
