Tags: Shiller | stocks | ECB | market

Yale's Robert Shiller: 'We Should Be Worried About Steep Decline' in Stocks

By    |   Wednesday, 18 June 2014 02:54 PM

Many investors are nervous that the stock market may soon plunge, and that concern is understandable, says Nobel laureate economist Robert Shiller of Yale University.

"We should already be worried about a steep decline," he tells Forbes. "The market is highly priced, but by my standards not quite as highly priced as it was in 2007."

Shiller is referring to his cyclically adjusted price-earnings ratio, which is based on the last 10 years of earnings. The ratio reached 27 in 2007, when the stock market peaked, and stands at 26.1 now.

Editor’s Note:
New Warning - Stocks on Verge of Major Collapse

"That's close, and that is a cause for concern," Shiller argues. "So it might be a time to tilt one's investments away from the U.S. Don't get greedy."

The S&P 500 hasn't seen a 10 percent correction in 32 months, compared with an average of approximately 18 months between such corrections since 1946.

The European Central Bank (ECB)'s bold easing moves have made Shiller bullish on European stocks. "I'm tempted to move into the stock market in Europe more," he notes.

"The ECB is "being very aggressive at the same time the U.S. is talking about raising rates."

As for U.S. stocks, renowned stock trader and author Alexander Elder expresses much more certainty than does Shiller that equities will plummet.

"This market is running on hot air and inertia," Elder tells MarketWatch. "The party is still going on. But there are police lights flashing down the block, and the party is about to get busted up. The longer it goes, the nastier it will fall."

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

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Many investors are nervous that the stock market may soon plunge, and that concern is understandable, says Nobel laureate economist Robert Shiller of Yale University.
Shiller, stocks, ECB, market
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2014-54-18
Wednesday, 18 June 2014 02:54 PM
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