Transcript:

Hi, I’m Ameya Hattangadi, Associate Portfolio Manager at Morningstar Investment Management. Welcome to the Morningstar Market Minute, a video series where we explore markets, the economy, and other notable trends every Friday lunchtime.

Another week… and another all-time high. It feels like nothing can stop the AI juggernaut right now. U.S. equities keep hitting record levels—and even Bitcoin has joined the party, breaking through $125,000 US dollars for the first time ever.

Fed Chair Jerome Powell summed it up pretty neatly this week when he said, “equity prices are fairly highly valued.”

When the head of the world’s most influential central bank starts saying that out loud, it’s probably a good moment for investors to pause and think.

Of course, Powell’s not the first Fed Chair to sound a warning. Back in 1996, Alan Greenspan gave us that famous phrase—“irrational exuberance.” He was talking about the internet boom at the time, and he wasn’t wrong. Valuations were stretched. But it still took another three years before the dot-com bubble finally peaked.

We might be seeing something similar today. The potential for AI to reshape global growth is huge—but it’s also hard to measure. And that uncertainty can support higher valuations for a while.

Still, history has a perfect track record when it comes to expensive markets: they always normalise. Powell knows that. Investors know it too.

The Shiller P/E and other valuation measures are all near record highs. And while valuations don’t tell you when markets will turn, they do remind us to stay disciplined.

So right now, we’re going back to basics—focusing on the long-term, anchoring on an investment’s intrinsic value rather than fleeting sentiment, and buying assets at a discount to their fundamentals.

AI could be a great growth story for years to come, but a lot of that optimism is already baked into the price. That’s why we’re tilting our portfolios toward areas like emerging markets, healthcare, and consumer stocks — segments with robust earnings potential and less stretched valuations. And of course, we’re staying broadly diversified and sizing our positions carefully to balance risk and reward.

That’s it for this week’s Market Minute. Thanks for watching—and we’ll see you next Friday.