Tags: Samuelson | QE | stocks | value

WaPo's Samuelson: End of QE Doesn't Doom Stocks

By    |   Thursday, 13 November 2014 02:55 PM

Quantitative easing (QE) didn't send the stock market into a bubble, and the end of QE won't hurt the stock market, according to Washington Post columnist Robert Samuelson.

"Did QE artificially boost stocks? Did it underwrite rampant speculation? Is the market dangerously overvalued?" he writes. No is the answer.

Just have a look at the S&P 500's price-earnings ratio, Samuelson says. It totaled about 19 as of June, the latest complete data. That compares with an average of about 17 since 1935.

"To me, this suggests that stocks aren't wildly overvalued. They're trading within historical ranges," Samuelson says.

Stocks have more than tripled from their March 2009 lows, but "these gains mainly recouped huge losses inflicted by the financial crisis," Samuelson writes.

"What I conclude is that QE didn't cause most of the market's rise. Profits did. QE might have had some effect, but despite widespread claims to the contrary by Wall Street analysts and investment managers, the added impact was at most modest."

To be sure, stocks may fall, but the end of QE wouldn't be the cause, he says.

Thomas Lee, co-founder of Fundstrat Global Advisors, hasn't dropped his forecast for the S&P 500 index to reach 2,100 by year-end.

That would represent a 3.2 percent move in the next 6 ½ weeks from 2,034 Thursday afternoon. That may not sound like much of a gain, but it equates to an annualized rate of 26.7 percent.

"We're in a seasonally strong period, so I think the markets will close above our targets," Lee told CNBC. "I would say if you feel uncomfortable being long, it's a good sign because that's how bull markets should feel."

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Quantitative easing (QE) didn't send the stock market into a bubble, and the end of QE won't hurt the stock market, according to Washington Post columnist Robert Samuelson.
Samuelson, QE, stocks, value
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2014-55-13
Thursday, 13 November 2014 02:55 PM
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