Nobel Prize-winning economist Robert Shiller warns investors to start selling stocks now that the market's bull run has charged into the record books.
The S&P 500's bull market turned 3,453 days old on Wednesday, making it the longest such streak in history, according to some investors' definition.
"We've set a record on length of bull markets. That has to be for most investors a worrisome sign, because we've had 13 bull markets since around 1930 and this is the longest one, by day apparently, so the question in my mind is ‘How much are people paying attention to this?’" Shiller, a professor of economics at Yale University, recently told CNBC.
"If we compare this with the long history of the stock market, we are still in a moderate inflation period so it's both inflation and stock buybacks that push stock prices up even if there's no real gain in the strength of the companies. They're numerical things, so that's part of what makes this latest news about the longest bull market less impressive," said Shiller, who was awarded the Nobel Prize in Economic Sciences with Eugene Fama and Lars Peter Hansen in 2013.
Wall Street is widely considered to be in a bull market that started on March 9, 2009, when investors grappled with the global financial crisis that had vaporized over half of the U.S. stock market’s value. Since then, the index has more than quadrupled.
Now after nine years and five months, investors are debating when, not if, the current run-up in stock prices will end.
"The last time we had a record set was in the 1990s and it didn't correct the market for years. People started talking about the longest bull run around 1996 and it went for four more years going up," Shiller said.
"My suspicion is that this news is not so dramatic and it will not change the probability of a corrections by a whole lot, but I could be wrong about it," said Shiller, who helped develop the widely-followed S&P/Case-Shiller Home Price Indices.
"Tax cuts are one of many factors that affect markets and we're just starting to see the tax cuts and it's affected the psychology of the markets," Shiller said.
"And people are not mostly calculating what the corporate profit tax will be, they're thinking 'Donald Trump is president and it's a new era he's the inspirational speaker and he's the first U.S. president who has a history as a motivational speaker,'" said Shiller, who developed the cyclically adjusted price-earnings (CAPE) ratio market valuation measure, which is calculated using price divided by the index's average historical 10-year earnings, adjusted for inflation.
"I think this market rally is a complex interaction of psychology and free market economics."
Meanwhile, Trump said he doesn’t see a reason for Congress to impeach him but that the stock market would plummet and Americans would be poorer if lawmakers did so.
"I don’t know how you can impeach somebody who’s done a great job," Trump said in a wide-ranging interview with Fox News broadcast Thursday.
"I’ll tell you what, if I ever got impeached, I think the market would crash,” Trump added. “I think everybody would be very poor. Because without this thinking you would see numbers that you wouldn’t believe, in reverse."
Trump’s remarks built on his history of defying presidential traditions by commenting extensively on the stock market. U.S. equities are in the middle of the longest bull market ever, buoyed in part by his tax cut but predating him by years and undergirded by corporate earnings and low interest rates.
“Often when you hit these milestones, it causes psychological issues,” Tom Plumb, chief investment officer of the Plumb Funds in Madison, Wisconsin, told Bloomberg. “But the reality is, it’s long because we’ve been a favorable environment, and a lot of the underpinning of that favorable environment is still in place.”
Material from Bloomberg and Reuters were used in this report.
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