Buttonwood: Investors are both bullish and skittish about share prices

Posted: May 5, 2017 in economy
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Investors are simultaneously bullish and skittish about valuations

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Buttonwood

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The data economy demands a new approach to antitrust

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TEN years ago this month investors were pretty confident. True, there were signs that problems in the American housing market would mean trouble for mortgage lenders. But most people agreed with Ben Bernanke, the Federal Reserve chairman, that “the impact on the broader economy…seems likely to be contained.” The IMF had just reported that “overall risks to the outlook seem less threatening than six months ago.”
That was reflected in market valuations. In May 2007 the cyclically-adjusted price-earnings ratio (CAPE), a measure that averages profits over ten years, was 27.6 for American equities (see chart). That ratio turned out to be the peak for the cycle. As the …

via Economic Crisis http://ift.tt/2p1pJ0r

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