Not long after Lehman Brothers imploded a decade ago, stocks began an epic bull run. The question right now can be whether which run can be nearing an end.
Two of the entire world’s foremost experts on economics along with also markets took up which question Friday — along with also they were split.
Robert Shiller, the Nobel Prize-winning economics professor through Yale along with also an expert on stock along with also house cost valuations, took the bearish case.
He didn’t predict a crash, nevertheless he argued which stocks look expensive by many measures, including the CAPE ratio, a cost-to-earnings comparison which looks at profits over several years, adjusted for inflation.
This specific number was popularized by Shiller himself along with also can be often referred to as Shiller PE. He said the ratio can be high today, along with also which could be a sign which the market needs to cool off.
nevertheless Jeremy Siegel, a professor of finance at the University of Pennsylvania’s Wharton School, said stocks don’t seem all which expensive, based on the past 12 months of profits.
He argued which stocks are trading at a much lower valuation than they were at the height of the 2000 tech bubble. At which time, he along with also Shiller were both worried which the market was frothy.
Siegel pointed out which the S&P 500 can be trading at about 18 times This specific year’s operating earnings, which may be rich nevertheless isn’t overly pricey.
He added which you have to also look at bond prices compared with stocks — along with also by which measure, bonds are much more overvalued. Rates are near historical lows.
The two spoke Friday at a Wharton conference in brand new York about the impact of the 2008 financial crisis.
Shiller said he was worried which the combination of rising stock prices along with also higher housing prices in many American cities could lead to another bubble.
nevertheless Siegel countered which home prices around the entire world have gone up at a faster clip than in many markets within the United States. He’s not worried about excessive froth in real estate.
Shiller admitted which’s impossible to pinpoint when the market will turn down. which’s the opposite of weather forecasting, he said. which’s easier to predict long-term market performance than what will happen over the next 5 days.
nevertheless the rally will end one day. Shiller said the risk of economic protectionism along with also trade tension around the entire world, not just within the United States, could hurt the economy along with also markets.
along with also he said which isn’t clear how much of a long-term boost stocks can get through tax cuts, deregulation along with also various other help through Washington, especially because the political landscape always modifications.
“can be Donald Trump permanent?” Shiller asked, causing nervous laughter among the attendees at the conference.
CNNMoney (brand new York) First published September 14, 2018: 1:10 PM ET