Monday, November 18, 2013

It seems the stock market goes up every day

It seems the stock market goes up every day, and the more it rallies, the more we hear about the prospects of a bubble. Bulls will tell you we aren't in a bubble because valuations remain modest relative to history, especially when compared to previous stock market bubbles. Bears will tell you we are in a bubble because assets are being artificially inflated by the Fed's quantitative easing and zero-percent interest rate (ZIRP) policy. I would say that asking whether we are in a bubble is asking the wrong question. The real question equity investors should be asking is what this historic rally portends for future returns.