Tags: Coumarianos | savings | stocks | bonds

Former Morningstar Analyst Coumarianos: Boost Your Savings Now, as Stocks and Bonds Look Vulnerable

By    |   Saturday, 07 February 2015 04:47 PM

Stocks and bonds have generated huge returns since the end of the 2008-09 financial crisis, with the S&P 500 index tripling since March 2009.

But the trend likely won't continue, says former Morningstar analyst John Coumarianos. And increased savings is the best investment approach for that situation, he writes on MarketWatch.

"Stocks and bonds appear poised to deliver lower returns than they have. And, of course, cash currently yields nothing, guaranteeing a negative real or inflation-adjusted return for the time being," Coumarianos says.

"Investors might think the strongest response to this situation is to take more risk. But taking extra risk in markets that already seem overpriced could result in severe losses. Instead, you must save more to meet financial goals."

As for stocks, they "will probably lag in the coming decade, because they are historically expensive," Coumarianos says.

Robert Shiller's cyclically-adjusted price-earnings ratio, based on 10 years of earnings, stands at 27.2, topped only in 1929, 2000 and 2007, just before market crashes.

John Bogle, the legendary founder of Vanguard Group, is concerned about stocks too.

Bullishness now prevails in the stock market, but "bullish thinking changes for no apparent reason," he told Swiss business magazine Finanz and Wirtschaft. "The market seems to have taken on a nervous cast and there is very little anybody can do about that."

And what dangers do stocks now face?

"There are financial risks, economic risks and the risk of war rising all over the world," Bogle says. "

"I’ve been saying for several years that we have a stock market that seems to be ignoring those kind of risks. I think we’re seeing a turn in lower global economic growth and a turn in lower corporate earnings."

While he doesn't expect a 25 or 30 percent drop in stocks, "it easily could" occur.

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Stocks and bonds have generated huge returns since the end of the 2008-09 financial crisis, with the S&P 500 index tripling since March 2009. But the trend likely won't continue, says former Morningstar analyst John Coumarianos.
Coumarianos, savings, stocks, bonds
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2015-47-07
Saturday, 07 February 2015 04:47 PM
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