Will there be a stock market bubble?

8th January 2014 No Comments

stock bubbleWaiting for the proverbial other shoe to drop is a regular pastime for even the most optimistic of investors. And with most in agreement that the economy still has a way to go in terms of recovery, most also agree that there must be a stock market bubble waiting to burst in the near future.

CNN’s Paul La Monica isn’t so sure. As he points out, in 2013 the market fought ahead consistently with regular small setbacks, rather than surging forward on several big days in erratic fashion.

Plus, earnings are expected to rise by up to 10% this year, which will naturally equate to a good year for the market if it holds true. So yes, while stocks are up about 15% from their value in 2007, earnings are expected to be 16% higher than then, according to PNC chief investment strategist Bill Stone. Not exactly a cause for concern, right?

Now, this doesn’t mean that we should expect a repeat of 2013. That’s crazy talk, of course. But why do we have to default to gloom and doom whenever things are going better than expected? Let’s not forget that the market largely doesn’t care whether it’s a new calendar year, month, quarter, or whatever. Thus, we’re not headed for a downturn simply because 2013’s over. Remember when people said last fall that the momentum wouldn’t last? Last summer? Last spring?

Plus, for every stock like Twitter or Netflix that is supposedly overvalued, there are plenty more always waiting to outperform expectations.

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