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Survey: Economists See No Stock Market Bubble

Rising corporate profits are fueling stock price increases


economic headlines 2011With the stock market having risen past 15,000 in recent weeks, and after having set a series of record highs, many are wondering if the stage has been set for another sharp downturn.

While some observers attribute the market’s dramatic jumps to the Federal Reserve’s continuing policy of low interest rates and warn that a stock bubble may be forming, a recent survey shows that economists, by and large, disagree. The Associated Press surveyed almost three dozen economists, most of whom said that rising corporate profits are driving climbing stock prices, which, they add, are not overvalued.

Markets Continue to Rally Like It’s 1995
Markets Continue to Rally Like It’s 1995

A majority of the economists do credit some of the stock market’s recent gains to the Fed’s bond-buying and low interest rate policies, but also note that stock prices are behaving within historic norms considering rising corporate profits. Stock prices have risen 19% since November, but relative to corporate earnings forecasts, the Standard & Poor’s 500 Index has reached just half the level it hit in 1999, on the eve of the Dotcom bubble’s burst.

In the survey, economists said that a recovering housing market would lift the national economy, consumer spending would rise as unemployment falls and that Europe’s struggling finances remain a drag on the global economy.

Article printed from InvestorPlace Media,

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