Should We Be Worried about the Stock Market?

Should We Be Worried about the
Stock Market?
By www.ProfitableTradingTips.com

http://profitabletradingtips.com/profitable-trading-tips/should-we-be-worried-about-the-stock-market
Stocks are at an all-time high but
the ratio of total market cap to
GDP (the Buffet valuation
indicator) shows that the entire
market is historically overvalued.

Should we be worried about the
stock market or is this a new era
of market calm?

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Before We Continue…

Calm before the storm may be a
more apt description.

fortune lists six reasons we should
be worried about the stock
market today.

the stock market has entered
another golden era of supreme
calm.

americans are expressing
confidence that the big returns
equities have long delivered will
keep coming, and that the gains
will flow smoothly.

but if you’re relying on your equity
portfolio to pay for your kids’
tuition and fund your retirement,
which is pretty much everyone
these days, it’s time to get real,
and get worried.

despite the extreme calm, this
could be one of the most
treacherous times to dump all
your money into the stock market.

The main problem according
to fortune is over confidence and
ignoring the warning signs.

Their six reasons to worry about
the market are these.

1. really high stock prices together
with a s&p 500 pe ratio of 25.5
2. profits that exceed growth and
are unsustainable
3. low interest rates with no room
to go lower

4. populist political climate
clamoring for more benefits to
workers and higher taxes
5. rise of the ultra-right, especially
in europe which could lead to
political, social and economic
chaos
6. low oil prices, market glut and
potential for total price collapse
leading to a world-wide credit
crisis

When everyone has decided to
get into the market and that prices
will go up forever is typically when
smart investors hedge their bets
or just get out and hold cash.

How about Interest Rates
and Bank Stocks?

The Fed appears poised to inch
up on interest rates and bank
shares went up.

If banks do better with higher
rates isn’t this a reason not to be
worried about the stock market?

The los angeles times writes
about bank shares and higher
interest rates.

banks led the stock market higher
monday as investors anticipate
that the federal reserve could
raise interest rates this year from
their historically low levels.

that could help banks recover
from a long slump by making
lending more profitable.

But just how high and how fast will
rates rise?

Our sister site, forex conspiracy
repor tasked where will interest
rates be in 10 years?

the fed will raise rates as the
economy warrants.

according to recently published
research rates will not go up very
fast for quite a while.

the fed is heading for a shallow
rate path for the next decade and
research indicates that ten years
from now rates will be one percent
higher.

the current consensus of fed
authorities is 1.5% and there is
always the possibility of negative
rates if recession re-emerges and
the fed needs to reduce rates into
minus territory.

So, should we be worried about
the stock market?

It always makes sense to retain a
bit of skepticism when seem too
good to be true they probably are
just that.

Should We Be Worried about the Stock Market?

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Should We Be Worried about the Stock Market?