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Thursday, August 27, 2015

Shiller: Rising Anxiety That Stocks Are Overpriced

Robert Shiller (a reason to agree with Tim Duy):

Rising Anxiety That Stocks Are Overpriced: Over the five trading days between Aug. 17 and Aug. 24, the U.S. stock market dropped 10 percent — the official definition of a “correction,” with similar or greater drops in other countries. ...
But there are reasons to question whether this was a quick, effective slap on the wrist, or if the market is still too overactive, and thus asking for a more extended punishment. ...
It is entirely plausible that the shaking of investor complacency in recent days will, despite intermittent rebounds, take the market down significantly and within a year or two restore CAPE ratios to historical averages. This would put the S. & P. closer to 1,300 from around 1,900 on Wednesday, and the Dow at 11,000 from around 16,000. They could also fall further; the historical average is not a floor.
Or maybe this could be another 1998. We have no statistical proof. We are in a rare and anxious “just don’t know” situation, where the stock market is inherently risky because of unstable investor psychology.

    Posted by on Thursday, August 27, 2015 at 10:08 AM in Economics, Financial System | Permalink  Comments (66)


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