US stocks started the week positively. The S&P 500 ended up 0.2 percent on Monday after having fallen 0.8 percent at the start of trading.
Helping stocks to rebound were reports that the services sector in the US continued to grow in April.
The Institute for Supply Management reported on Monday that its non-manufacturing index rose to 55.2 last month from 53.1 in March. In particular, the orders index jumped to 58.2 from 53.4, the biggest gain since March 2010.
However, Markit's services sector index also released on Monday showed a decline to 55.0 in April from 55.3 in March. Markit's composite index fell to 55.6 in April from 55.7 in March.
Meanwhile, despite US stocks becoming increasingly overvalued, the bull market may still have some way to go.
In his latest quarterly letter, Jeremy Grantham estimates the market is currently overvalued by 65 percent.
However, based on this valuation, Grantham does not see the market as being in a bubble at the moment. Therefore, while Grantham sees some difficulty for the market through the middle of the year, he thinks it is likely to turn stronger from the fourth quarter and continue to rally to the next presidential election.
By the end of its run, Grantham thinks the S&P 500 is likely to have hit 2,250.
“And then around the election or soon after,” he adds, “the market bubble will burst, as bubbles always do, and will revert to its trend value, around half of its peak or worse, depending on what new ammunition the Fed can dig up.”
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