Is the stock market over-valued? Can we expect it to fall again?

In an interview with the Financial Times, which I blogged about here, billionaire financier George Soros warns that we can expect a contraction. "I think certainly there could be another dip in the stock market because, right now we are enjoying the confidence multiplier and there’s a sort of a hope that this is a crisis like the previous ones and we will just sort of recover in a V-shape recovery. So, when that hope is not fulfilled, I think that will be ... I can’t see it being fulfilled. I may be wrong. I’ve been wrong before, but I just don’t see where the growth in the US economy can come from."

Now we have another warning that it could drop sharply.

Economist Andrew Smithers, president of research firm Smithers & Co, says the S&P is over-valued 40% and is set to fall as banks sell shares to raise badly needed capital. And that will mean a double dip recession. Smither says: "Quantitative easing has set off another sharp, and so far containable asset bubble. But if it gets too high and starts to come down then we’ll go straight back into recession."