The reason to believe the US stock market is overvalued can be summed up in one four-letter word: CAPE. The cyclically adjusted price/earnings multiple used to do a great job of signalling when the US stock market was excessively cheap or expensive. That signal was valuable; it did not help predict the timing of a peak or trough, but was very powerful in predicting returns 10 years into the future; the cheaper the market, according to CAPE, the stronger the 10-year returns.
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