Not Another Bubble?

Jan 24 2013 @ 9:54am

four-bears

Neil Irwin notes that “last time the S&P lodged a four year gain as strong as the current run was from late 1996 to late 2000, which was, with hindsight, a time of an epic bubble.” He thinks the recent gains are different:

The key thing to know is that American businesses have spent the last four years becoming much more profitable. Tabulations by Bloomberg News, based on 11,000 analyst estimates, found that 2013 earnings for the Standard & Poor’s 500 are expected to be about $1 trillion, 31 percent more than the 2007 peak. If you’re an investor buying into the stock market, you are getting much more earnings power out of Corporate America at a lower price.

(Chart: Comparison of four major American bear markets from Doug Short)