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(EMAILWIRE.COM, May 18, 2013 ) San Francisco, CA -- While it may, at times, seem impossible that there could be record highs on a nearly daily basis and simultaneously stocks are considered cheap. However, the research revealed by the Federal Reserve Bank of New York seems to say just that. In the study titled “Are Stocks Cheap”, it is apparently not only the case, but the company also seems to assert that “historical high excess returns for the S&P 500 for the next five years.”
Simon Baker, who is a hedge fund manager of Baker Avenue Asset Management noted that he believes the hype behind the numbers shown by the Fed of NY. We’re hitting new highs but we’ve basically just recovered where we were over the last 10 years.”
Analysis of the equity risk premiums in the study are expressing that the excess return from stocks, versus the risk-free asset ratio, has never experienced such low ratios. Baker is quick to point out that part of the calculation is due to interest rates being so low, but does not ignore the fact that there is more at play.
“Clearly the Fed’s motive is to put money back into equities. 401(k)s will be higher, people will feel like they’ve got more assets and will be spending more money,” he says. “I think it’s interesting that the Fed is coming out and actually using some propaganda to try and get money into stocks.”
Simon also pointed out the attractiveness of equities, as numbers continue to fall. It seems to be that essentially the key to the amount of buying, despite low numbers, is that at some point there has to be a strong rebound on the pricing and risk of the stocks. Because of this fact, more equities are being bought now, while stocks are at a 50-year low, and as the S&P predicts high returns for the next half-decade.
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Source: EmailWire.com
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