In this article, published slightly early as the facts change so quickly that it might be stale in a few days, I want to follow up on my April mid-month post comment stating that I believe that whatever behavioural factors are driving stock market valuations, in the end fundamental factors will serve to restore prices to levels that make sense in an investment world where owning one sort of asset is always at the opportunity cost of owning another with different risk and return characteristics. In other words, an overvalued asset class will always eventually be sold off to buy into a cheaper one – we just don’t know when that will happen.
What I thought might be useful would be to list out some of the fundamental data that suggest that equity markets have become detached from reality. You can make a judgment as to what, taken all together, this information implies for the immediate future and whether or not those implications would prompt action on your part to defend or enhance your personal wealth.
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