I imagine myself explaining this matter to a room full of millennials with their craft beers, artisan sandwiches and just not paying attention to me while on their phone. Truth is, the question I ask myself whether the market is too high is dependent on ‘where else can I put my money to make a decent return other than the stock market?’ The answer right now is nowhere.
Let’s look at bonds. As of today, 5 year is at 1% return, a 10 year at 1.8%, and even a 30 year is under 3%. If I’m 35 right now, I have to wait till I retire to get 3% return. That’s not a good investment. Lets look at other markets. Would I put money into countries whose markets are unstable either by shady government manipulations, policies or political instability? Nope. So I can now get rid of China, Russia, Euro zone (various countries in recession), and definitely not the war torn, unstable Middle East. If I buy a house in Iraq one day, will it be removed the next day by either a bomb or ISIS?! Again, not a good investment.
I like solid, stable companies founded on peaceful lands encouraged by capitalistic ideologies, they are a known quantity. The $3.5 trillion the Fed printed over these 7 years has got to go somewhere – that’s trillion, with a capital T. And right now, investors who control all this printed money don’t have a better place to put them than in our very own country where the best and most profitable companies in the world exist.
But wait? Is it a bubble? A measure of whether it’s a bubble can be determined simply by the amount of cash there is out there. The higher the amount, the higher the inflation. Right now, the inflation is under 2%, that’s lower than the Fed’s 2% target, nor are we seeing a steady increase in inflation year to year. Without inflation as a concern, we know that these are solid gains. With US companies more profitable than ever, it’s a good sign the economy is healthy. Don’t believe me in all this? Google everything I’ve said. In a nutshell, will the markets go higher? You bet they will and you can take that to…no not the bank… the stock market.