On August 26, 2014 theS & P500, the best known index of the most important stock market in the world, ha exceeded 2.000 points for the first time in its history. At the same time, i returns offered by ten-year bonds have remained unchanged below 2,5%. Why?
The reasons behind the record
It would seem that the combination of improvement of the American economy, low bond yields e the recent ones behavior of central bankers contributed to pushing the S&P500 index above the two thousand mark. Let's take a closer look at the reasons for the record at the annual central bankers' summit Jackson Hole.
There are two tones perceived by the markets in this regard:
- a ECB open to more monetary stimulus (although Draghi did not mention the possibility of QE);
- a Janet Yellen less "dove", but which has not exposed itself to a immediate increase in interest rates.
The behavior of the FED in recent years it has been characterized by a expansionary monetary policytogether with massive purchases of government bonds. The aim was to reduce interest rates on the money markets and encourage traders to buy other asset classes, including actions.
Il Central bank behavior is one explanation of why stock and bond prices are so high.
In addition, in recent years, large-scale purchases e increase in dividends by companies like Apple and other big names in the S&P500, drove up stock prices. Several companies have generated record profits by focusing their attention on corporate policies of cost reduction and operational efficiency.
But there is a compelling reason to justify it persistence of high stock and bond prices indefinitely over time?
Why do prices stay high?
A non-traditional answer is that perhaps the current price level has something to do with anxiety about the future. Since the outbreak of the Great Recession in 2008, the people are more concerned about their salary or job. This apprehension leads them to invest in stocks and bonds, even if they are expensive. This, however, is only a partial explanation according to the Nobel Prize for Economics 2013 Shiller. His suspicion, in fact, is that the answer must be sought in the fields of sociology e social psychology, in phenomena such as theirrational exuberance (irrational exuberance).
An analysis of the US stock market
I propose a comparison on the same graph between:
- THEperformance of the S&P500 (the values are in the right axis), compared with the to evaluate made in the last 12 months of the companies included in the index (values in the left axis);
- I values of P / E to Graham and Dodd (G&D) with the long-term average of the same P/E of G&D in the last 15 years (the values are in the left axis).
At this point, let's focus on dot.com bubble, around 2000. In this period, the quotation of the S & P500 (blue line) was at a frighteningly high level compared to the average earnings of listed companies, i.e. earnings (red line).
If we focus on the current period, unlike the previous period, theperformance of the S&P500 does not show a significant deviation from the profitsi. Furthermore, if we look at the P/E values of G&D, they are very close to the equilibrium values of the long-term average P/E.
Analyzing the data, we can say that there is no bubble in the American market. At least for now.
However, by this we do not mean that the concerns of the last few months between finance experts and the world media about i asset bubble risk (real estate, stocks and shares long-term obligations) are unjustified, indeed!
Those who warn of the grave dangers of speculating on price developments do so for good reason. In fact, such warnings could help to ward off the continued speculationwhich makes them more and more dangerous.
