The Coming Stock Market

It’s often repeated by the gurus, stocks outperform other investments over the years. Come hell or high water.

These days, there is a widening belief that the current financial crisis will be with us for years ahead. A number of financial experts see equity securities returns in the future well below the long-term average of the 9% to 10% of the past.

This is understandable. Bull market psychology has lead to bearish sentiment that now prevails.

Using standards of price/earnings, you can say securities markets are undervalued. Yes, opportunities are always available in bear markets because of that. The public is generally wrong, pulling out of the markets at their lows and entering at relative highs.

The question is, the U.S., and probably the rest of the developed world, is in a period of low growth. Ordinarily it could last for a couple of years. This time, the U.S. budget deficit, particularly, can have a devastating effect on stock performance.

Sharp inflation in coming years, brought on by terrible fiscal and monetary policy, is not a harbinger of a booming stock market. ( See the Earl J Weinreb NewsHole® comments.)