OPINION
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Don't Celebrate Yet, Stock Market
By Kevin Spak
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Posted May 8, 09 12:11 PM CDT
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(Newser)
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Don’t get too excited by the stock market’s recent rally. Stocks may go up another 10%-20% this year, says analyst Jeremy Grantham, but after that the market will crash again, and stay that way for years. “We've lost our shirts and we feel poor,” explains Henry Blodget of Business Insider, “which isn’t conducive to profligate spending.” Plus there’s still $10-$12 trillion of debt to get rid of.
Stocks have climbed back to fair value. Before the crash, they’d been overvalued for about 15 years, so we’re probably due for a similarly protracted under-valuation period. “No longer as rich as we thought—under-saved, under-pensioned, and not realizing it—we will enter a less indulgent world," predicts Grantham. "We will save more, spend less, waste less. It may not even be a less pleasant world.” Unless, of course, you have a profit margin to watch.