U.S indexes (^GSPC, ^DJI) are toying with record highs but investors are more or less shrugging it off. That, says Yahoo Finance Editor-in-Chief Andy Serwer, is a good thing. “Irrational exuberance is a real sign of a top and we don’t have that right now,” he notes.
Still, it doesn’t mean investors should be overly bullish on equities. Serwer spoke with BlackRock CEO Larry Fink on Yahoo Finance:
I think there is a lot of reason for valuations for where they are today...but I am not as sanguine or as positive as I was two years ago. I think there are many more warning signals today than there were two, three years ago. Two years ago and three years ago, I said be 100% in equities. I would not recommend that today because the valuations are much higher than they were a few years ago.
And it’s not just U.S. markets that are experiencing the highs. Japan’s Nikkei is at 15 year highs. The Hong Kong Hang Seng index is higher than it has been since December of 2007 and European markets are just below the all-time highs they notched last month.
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“It really was a long grind,” notes Yahoo Finance Senior Columnist Mike Santoli. “It was a lost decade and we’re just getting out of it. It also has been a relatively measured climb...Global indexes are at these highs because very slow growth and very high liquidity are almost ideal conditions for equity prices for financial markets and the question now is, is any of that going to change?“
Serwer adds, “The real question to me is how much of this rally has to do with cheap money and how much of it has to do with corporate performance and at some point we’re really going to find out.”
That “some point” is expected sometime later this year when the Fed raises rates making easy money just a little less easy. Can the market continue to thrive in such an environment?
