The Clinton Herald, Clinton, Iowa

AP story section

November 19, 2013

Despite surge, many don't see bubble

NEW YORK — Is the stock market due for a pullback?

The Dow Jones industrial average has surged 900 points since early October and crossed the 16,000-point threshold Monday. IPOs are hot again. Small investors, stirred from their post-recession daze, are coming back to stocks. And it’s been more than two years since the market has had a significant slump.

Those trends have raised concerns of a stock bubble.

They shouldn’t, money managers say, because even with the broader market’s 26 percent jump this year, stocks aren’t overpriced yet.

“Stocks are not cheap, but that does not mean that the stock market is expensive,” says Russ Koesterich, chief investment strategist with Blackrock.

The ratio of stock prices to projected profits for companies in the Standard & Poor’s 500 index is 15, according to data from FactSet. That’s slightly below the average of 16.2 over the last 15 years and far below the peak of 25 in late 1990s and early 2000s.

Underneath the rally, most of the fundamentals of this market remain solid. Corporate profit margins are near historic highs and profits are expected to keep rising. There are no signs the U.S. economy, which is still recovering from the 2008 financial crisis and Great Recession, will slip back into a downturn.

All that leaves investors with conflicting feelings. Few see the stock market as attractive as it was at the beginning of the year, but fewer see an alternative where they should put their money.

Bonds are down 2.1 percent this year, according to the benchmark Barclays U.S. Aggregate bond index. Cash has a near-zero return in money market funds. Gold has dropped 24 percent.

“It’s hard to say stocks are expensive when you compare them to any other asset class,” says Brian Hogan, director of equities at Fidelity Investments. “The other options are simply not attractive.”

Text Only
AP story section
  • Iraq violence threatens OPEC's precarious balance NEW YORK (AP) -- The oil market has balanced out quite nicely for OPEC in recent years. Now, upheaval in Iraq shows that balance may be more precarious than it has seemed. Dramatic changes in oil production around the globe have offset each other ins

    June 13, 2014

  • Board of Trade Grain mixed, livestock mostly higher CHICAGO (AP) -- Grain futures were mixed Thursday in early trading on the Chicago Board of Trade. Wheat for July delivery was 1 cent higher at $5.9025 a bushel; July corn was 1.25 cents lower at $4.4075 a bushel; July oats were unchanged at $3.4625 a

    June 13, 2014

  • Health campaign among nation's costliest CHICAGO -- President Barack Obama's home state agreed to spend $33 million in federal money promoting his health care law, hiring a high-priced public relations firm for work that initially was mocked and spending far more per enrollee on television

    June 13, 2014

  • Some states roll back teacher tenure protections WASHINGTON (AP) -- Even before a judge's scathing ruling against California's teacher tenure policies, the once-sacred protections that make it harder to fire teachers already had been weakened in many states -- and even removed altogether in some pl

    June 13, 2014

  • Tigers' Scherzer outduels Sale CHICAGO -- Max Scherzer already has a Cy Young Award. Now he has a complete game. Scherzer tossed a three-hitter in his 179th career start for his first complete game and Victor Martinez hit his 16th homer to lead the Detroit Tigers to a 4-0 win over

    June 13, 2014

  • $40M casino for rural Iowa approved BURLINGTON (AP) -- The Iowa Racing and Gaming Commission has voted 3-2 to grant a license for a $40 million casino development that would be located in rural central Iowa. Supporters of the Jefferson casino burst into applause during a meeting in Bur

    June 13, 2014

  • Principal case leads to two hearings RED OAK -- Two hearings are planned related to a southwest Iowa school district's plan to fire a high school principal. The Council Bluffs Daily Nonpareil reported the effort to fire Red Oak High School Principal Jedd Sherman will be the subject of a

    June 13, 2014

  • U.S. split outgrows voting booth WASHINGTON (AP) -- Political polarization in America has broken out of the voting booth. A new survey from the Pew Research Center finds Americans are divided by ideology and partisanship not only when they cast ballots, but also in choosing where to

    June 13, 2014

  • Cubs' offense no help for Samardzija PITTSBURGH -- Jeff Samardzija has some advice his pitching brethren when it comes to facing streaking Andrew McCutchen. Don't. The way the Chicago Cubs' ace looks at it, trying to get the Pittsburgh Pirates' star out at the moment only opens yourself

    June 13, 2014

  • State to reopen Juvenile Home DES MOINES -- A district court judge on Wednesday ordered the state to reopen the Iowa Juvenile Home, telling Gov. Terry Branstad he cannot unilaterally change a law approved by the state Legislature. Judge Scott Rosenberg said the home in Toledo was

    February 6, 2014

AP Video
Facebook
National News