S&P 500 CAPE at 42, near dot-com peak: portfolio manager

John De Goey recorded a podcast interview five weeks ago. The portfolio manager at Designed Wealth Management in Toronto told the Canadian Advisor.cast that the U.S.-Iran war would not end soon. He warned that U.S. equity valuations were unsustainable. Five weeks later, his commentary sounds prescient and the risks he flagged are still on the table.

De Goey holds a political studies degree from the University of Guelph and a graduate degree in public administration from Carleton University. That background gives him a lens most portfolio managers lack. He is worried about where the world is heading. “I’m genuinely worried that the world is going into a dark place in the not too distant future,” he said.

The core question was whether the U.S. economy still works as a safe haven for global investors. For fixed income and the dollar, the answer is yes. The U.S. Treasury market is the world’s most liquid. The dollar is the reserve currency. Those facts are not changing soon, even when U.S. policy itself drives the geopolitical risk. “Many people underplay the correlation between what goes on on Capitol Hill or Parliament Hill, and what goes on on Bay Street or Wall Street,” De Goey said.

The safe-haven label does not extend to U.S. equities, in his view. The stock market analysis shows a cyclically adjusted price-earnings ratio for the S&P 500 Index in the 40–42 range. At the height of the dot-com bubble in 2000, it was 44. De Goey sees the same pattern. “If you think about the internet boom, 25 or 30 years ago, it was the same sort of thing. … At some point, it becomes difficult to justify those valuations and things come back down to earth when people realize that we’ve reached the limits. I think we’re getting close to that with AI.”

The comparison cuts both ways. The dot-com bubble took years to deflate. Valuations can stay elevated longer than skeptics expect. De Goey is not making a timing call. He is pointing to structural risk that many market participants ignore.

Stagflation is another worry. He pointed to supply chain disruptions and inflation that are “baked in” even if the Iran conflict ended immediately. RBC and TD, among other forecasters, have made similar projections. “The last time we really had stagflation was in 1979 because of – wait for it – problems with Iran.” De Goey paused on that line. The parallel is not lost on him.

Markets hit new all-time highs through this period. Efficient-market theory would suggest prices reflect all available information. De Goey described a “disconnect” between that theory and current equity valuations. “There is so much concern about the risks associated with the Trump administration and how volatile it is. It would be folly, in my opinion, to act as though things are normal and not show some caution with regard to the risks associated with having such a volatile person as a head of state.”

De Goey has seen this movie before. “It happened in the 1800s with railways. It happened at the turn of the millennium with dot-com. And I think it’s happening again right now. I don’t know when the music’s going to stop. I think we’re getting close.”

The U.S. will keep its safe-haven status for as long as the dollar remains the global reserve currency and Treasuries stay liquid. What is less certain is whether U.S. equities will deliver for investors in the short-to-medium term. De Goey’s advice to advisors was direct: “You should be finding ways to diversify your portfolio away from those things that have done very well.”