[quote=SD Realtor]
Second, the low rates form a double whammy because investors have nowhere to put money. Do they choose an overbought stock market or an overbought real estate market? So now you have lots of investors buying….[/quote]
I missed this little nugget yesterday. My technical trading friends are pretty confident that we’ll see a pullback on the S&P to the 1,460 level, maybe a 30 pt pullback from where we are now before recovering to more than 1,530. But they pretty much ignore fundamentals, and fundamentally that market is not overpriced. We’re maybe a few hundreths of a percent over average historical P/E ratios for trailing earnings. And that ratio historically moves the opposite direction of interest rates. It’s pretty low when compared to historical periods of similarly low interest rates. Only a couple times in the last 100 years has the market tanked more than 5% from this level . And both times that was coincident to sharp increases in interest rates. Most recently in the late 70’s. Might that happen now? Seems unlikely in the near term.
