Noting that the Dow Jones Industrial Average and S&P 500 had both again recently hit new record highs, Willis asked Scranton directly, “Will the good times keep rolling?”
“Well, there’s no telling how long this momentum will last, but to me it’s starting to feel a bit like 2006 or 2007 all over again,” Scranton replied, referring to the upsurge just before the last major market downturn. “I tell investors, we have literally almost 200 years of stock market history that says there’s going to be another major drop coming up at some point soon, and how much do you want to push your luck?”
Willis said she agreed today’s high flying market seems like a “Fed-fueled rally,” driven less by economic recovery than by momentum from five years of “artificial stimulus” by the Federal Reserve that included bond-buying, money printing and suppressed interest rates.
Kotok also agreed the market’s action’s today defy conventional logic, and that as a market investor, himself, he is currently “nervous, worried and watching it rise.
“When you use a zero interest rate, the price can be infinity, but once that interest rate starts to change, this whole game changes,” Kotok said.
Siederman said, while he agreed today’s rally stems partly from momentum from the Fed’s efforts, he said another factor is that even though consumers haven’t fared well since the recession officially ended, Fortune 500 companies are “sitting on trillions of dollars of cash, and that’s why we have merger mania going on.”
Siederman noted that another reason for the increase in mergers is that companies still aren’t generating sufficient revenues on the heels of the recession and that mergers are a way to rectify those shortfalls.
Scranton agreed, adding that the current “merger mania” is further evidence of the disturbing disconnect between the optimistic markets and the underlying economy. “It’s trying to add shareholder value in an economy that’s basically turned at the same speed as the titanic,” Scranton said. “They’
Scranton, who is also an author and owner and CEO of Scranton Financial Group, has increasingly become a familiar figure on Fox News and in other national media outlets, where his expert insights into timely financial issues are highly sought after.
About Advisors’ Academy
David J. Scranton (CLU, ChFC, CFP®, CFA, MSFS) founded Advisors’ Academy in 2007 with a vision to build an innovative Independent Field Marketing Organization (FMO/IMO) that would teach other highly successful, motivated advisors how to achieve even higher levels of success while always putting the interests of their clients first.
Through ongoing personal coaching and training in a variety of novel, market-proven systems, and turnkey tools that encompass every aspect of the business, hundreds of elite advisors across the country are now sharing in the realization of Scranton’s vision.
In addition to running Advisors’ Academy, David J. Scranton is one of America’s most respected and successful independent financial advisors in his own right, and author of the acclaimed book, Stop the Financial Insanity; How to Keep Wall Street’s Cancer from Spreading to Your Portfolio.