What if we could see where the overall market was heading? Predictions abound and let’s face it, there’s a 50% chance of being correct. Back in April the Wall Street Journal ran a story titled “Is the Market Overvalued?” We had two financial heavyweights, on one side Robert Shiller of Yale saying stocks are expensive and on the other, David Bianco of Bank of America Merrill Lynch saying stocks are a bargain. So who is right? It’s too early to tell but looking at the S&P since April Robert Shiller is off to a good start.
Robert Shiller’s case is getting help from the financial crisis in Europe which started with Greece and has now spread to the “too big to fail” Italy. The crisis will engulf more countries if the political will to find solutions falls short.
Things are not much better in the US. The political will to rein in the debt and spending has yet to surface. Debt projected to exceed $26 trillion in 10 years (data from the Office of Management and Budget in the FY2012 report.)
The super committee failed to come to an agreement to cut $1.2 trillion of spending over ten years; a trivial amount when compared the trillions of debt. Some would argue this debt forecast is a best case scenario given today’s environment.