US stock market "vulnerable" to higher rates

The US stock market is turning into a bubble, according to one economist.

In a research note last week, Lombard Street Research chief economist Charles Dumas wrote that money and credit growth in the US is encouraging another bubble in stock markets.

"The Fed has put market sentiment before the economy yet again. It is doing U.S. stocks no favors by provoking an unnecessary bubble with its certain subsequent burst," wrote Dumas.

"When the Fed gets real and makes the necessary increases, this market could prove much more vulnerable than is traditional in the early stages of a rate-hike cycle," he added.

Black Swan investor Mark Spitznagel said as much.

In an interview with CNBC the previous week, Spitznagel said that low rates and high valuation add up to a stock market that is "extraordinarily sensitive to changes in rates".

And to emphasise how high market valuation is, John Hussman wrote today that on normalized profit margins, the cyclically-adjusted market P/E would be at 36.