Fear is Behind Stock Market Boom, Not Euphoria, According to Robert Shiller
First of all, welcome to the Stock Markets Blog, where we’ll cover current stock market trends and other events worth posting about. This week we’ll take a look at what Nobel Economics laureate Robert Shiller has recently said about the stock market highs we’ve seen lately.
Fear is Behind the New Stock Market Boom
Yale University professor Robert Shiller recently gave an interview to German newspaper Frankfurter Allgemeine Sonntagszeitung, during which he stated that the latest stock market boom is not because of the swollen egos of investors, but fear. He also warned about possible stock market bubbles and mentioned that oil prices were at a record low, indicating that it’s currently a good investment.
Shiller had this to say specifically: “The stock market boom we’re currently experiencing isn’t driven by euphoria … I call it the ‘new normal boom.’ … The mechanisms are all there, but the feeling is missing … We’re not seeing any optimism. This boom is driven by fear.”
Last Friday was a good day for stocks, with US and European stocks at record highs, including London’s FTSE, which reached beyond the 7,000 mark for the very first time in stock market history.
Low Interest Rates Further Fuel Stock Market High
Shiller further explains, “There aren’t many alternatives to stocks at the moment. We’re in a period of extremely low interest rates.”
Recently, the European Central Bank significantly reduced its interest rates and subsequently introduced much more liquidity into economics. Despite ECB taking part in lowered interest rates, Shiller reasons that central banks aren’t to blame for bubbles or point to for lowered interest rates, but international pessimism.
Shiller believes that oil is something worth investing in most of all, stating, “… I think now could be a good time to invest in oil or in a rise in oil prices. Prices are very low and there are a lot of reasons to assume that they won’t stay low.”
How long this “global fear” might last in the markets isn’t entirely certain, but it looks like now is definitely a good time to take advantage of the “new normal boom.”
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