A couple of articles debunk the notion that stocks have gotten ahead of rational thought.
There is a group of investors who believe that the stock market's current valuation reflects some irrational exuberance.
How else, the thinking goes, can one explain why the broader stock indexes have held onto gains in recent months even with building geopolitical tensions in the Ukraine and in the Mideast. Such investors also look at the famous cyclical-based valuation metric of their patron saint, Yale economist Robert Shiller, as evidence that stocks are ahead of where a rational market would place them.
But how often has the investment crowd really lost its collective wisdom? A couple of articles suggest that market valuations are quite reasonable.
As for rising geopolitical tensions, an article in the Financial Times cites JPMorgan Asset Management data indicating that the world's military skirmishes really don't matter that much to global equity markets -- at least for now. And a thoughtful piece by Reuters columnist Anatole Kaletsky pokes some holes in Shiller's widely-discussed valuation measure.
The Financial Times article makes a very simple point: that places like the Ukraine, Iraq, Israel and the Gaza – the so-called "war-zone countries" – really don't amount to much when looking at measures such as overall equity-market value, foreign direct investment, and global economic output, among other criteria....MORE
