The Wall Street bull market continues, with U.S. stocks repeatedly hitting historic highs since last year. However, a valuation metric for the U.S. stock market shows that the current valuation of U.S. stocks aligns with the level described by former Federal Reserve Chairman Alan Greenspan in December 1996 as 'irrational exuberance,' and has reached its highest level since 2002, indicating that the downside risk for U.S. stocks has increased. (Background: Expectations for Fed interest rate cuts are limited, U.S. stock market corrections, Trump’s inauguration is imminent… What do analysts think about the future of BTC?) (Additional background: The number of bankrupt companies in the U.S. has reached a new high since the financial crisis! Wall Street: The risk of economic recession may trigger a significant correction in U.S. stocks in the first half of the year.) The Greenspan valuation method compares the earnings yield of U.S. stocks with the yield on 10-year U.S. Treasury bonds. The yield is calculated as earnings per share divided by stock price. The basic logic of this metric is to measure whether the valuation of U.S. stocks is reasonable by comparing the returns of the stock market and risk-free assets, or whether it has reached irrational exuberance. According to a report by Marketwatch, Bloomberg columnist John Authers found that the current valuation of U.S. stocks has reached its highest level since 2002, consistent with the level described by former Federal Reserve Chairman Alan Greenspan in December 1996 as 'irrational exuberance.' This indicates that the downside risk for U.S. stocks has increased; the Nasdaq index peaked in 2000, followed by a stock market crash after the internet bubble burst. However, it took more than three years for the warning by Greenspan to reach its peak, suggesting that the responsiveness of this indicator may take a long time. Greenspan valuation method indicator. Source: Bloomberg. At the same time, the recent results of this indicator are not closely related to the stocks themselves, but more due to the soaring U.S. Treasury yields. The main reason for the recent surge in U.S. Treasury yields is market concerns about stubborn inflation pressures and the outlook for Trump’s second term. Nobel Laureate in Economics Paul Krugman explained that the surge in U.S. Treasury yields is because the market is starting to believe that Trump will implement ideas like high tariffs, corporate tax cuts, and mass deportations of illegal immigrants. If Trump really does this, it is very likely to boost inflation, forcing the Federal Reserve to halt interest rate cuts. The yield on the U.S. 10-year Treasury bond rose for the fourth consecutive day on Wednesday, closing at 4.683%, accumulating a rise of 12 basis points during this period. Changes in the yield of the U.S. 10-year Treasury bond. Source: Marketwatch. U.S. stock pricing is at a perfect level, prone to corrections. Federal Reserve Governor Lisa Cook also expressed her views on U.S. stocks on Monday, pointing out that at current prices, the stock market and corporate bonds are at risk of significant declines. As of Wednesday, the S&P 500 index is only 3% below its historical closing high. Goldman Sachs' Chief Global Equity Strategist Peter Oppenheimer stated in a report released on Thursday that as investors digest the rise in U.S. Treasury yields, high valuations, and uncertainty about further interest rate cuts, the current 'perfect' profit-making market environment may be difficult to sustain: The recent strong upward momentum in U.S. stocks has led to a near-perfect valuation in the current stock market. Although we expect the stock market to continue to rise overall throughout the year, mainly driven by corporate earnings, the stock market is increasingly vulnerable to corrective shocks, especially if U.S. Treasury yields rise further or economic data and earnings performance are disappointing. Peter Oppenheimer pointed out that three factors complicate the U.S. stock market landscape in 2025, including the possibility that the rapid rise in the stock market may have already reflected optimistic expectations for economic growth in 2025, high valuations limiting future returns on stocks, and abnormally high market concentration increasing portfolio risks. Related reports: Bitcoin plummeted to $96,000, NVIDIA plunged 6%, dragging down U.S. stocks. Will the Fed only cut rates once this year? Buffett's 'crazy cash hoarding' signals a crisis in U.S. stocks? Analyzing Berkshire's 20-year historical data gives you the answer. Wells Fargo warns: The disconnect between U.S. stocks and the real economy continues to widen, beware of a short-term crash. "Bloomberg warns: U.S. stocks are caught in irrational exuberance, what does the Greenspan valuation indicator reveal?" This article was first published on BlockTempo (the most influential blockchain news media).