While a considerable amount of global economic risk remains, the U.S. stock market continues its spectacular run. The unwavering trend of robust earnings growth from the S&P 500 has kept the bull market very strong and resilient for several years now. This strong earnings performance continues to push the Dow Jones Industrial Average and S&P 500 Index to new all-time highs.
U.S. dollar-denominated assets remain as the safe haven choice for institutions and sophisticated investors throughout the globe. At the same time, gold is losing its luster. Due to record-low yields on U.S. Treasuries, the premium required for stocks remains low. And once you consider the large number of blue chip stocks paying relatively generous dividends, it shouldn’t be difficult to see why investors have been piling into U.S. stocks.
Despite what you may have heard from those who spend most of their time engaged in sales and marketing activities, low interest rates alone have not been responsible for record earnings. Record-low funding costs afforded by low interest rates have enhanced the cost-effectiveness of stock buybacks, but U.S.-based corporations remain in the sweet spot of global economic activity.
Although the U.S. stock market continues to enjoy an increasing level of optimism, it is not in a bubble. This “stock bubble” myth has been propagated by those who have missed out on the greatest bull market rally since the Great Depression.
Many of these individuals have been warning investors to stay out of the U.S. stock market for five years now. As a result, they look quite foolish today. So in a desperate attempt to save face and reduce client departures, they have come up with this stock bubble myth.
Unfortunately, these individuals continue to be plastered all over the media and positioned as “experts.” This group of delusional mouth pieces spans the full spectrum, from gold dealers and financial advisers to hedge fund managers and bond managers. Quite simply, they are completely clueless and/or are trying to sway the sentiment in their favor.
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