Over the past week, we’ve been arguing that the stock market still has room to run despite high valuations. Yesterday, one of the most respected hedge-fund billionaires in the world, David Tepper, gave three reasons why he agrees.
1- Synchronized growth around the world. Europe, Japan, China, and the US are all growing at the same time, which has rarely happened since the financial crisis.
2- No regulatory pressures in the US. With Republicans in charge of Congress and Trump in the White House, we should expect business deregulation, or at least no new regulations. This is good news for future earnings.
3- “Sugar” is still being put on the economy. The three major central banks (the Federal Reserve, the European Central Bank, and the Bank of Japan) continue to boost economic growth with low interest rates.
As Tepper put it, “you can’t be short in this kind of setup”. He’s betting on a 3% growth for the US economy.
Tepper’s comments come of the back of Warren Buffett’s rosy view of the US economy and stock market last week where he expressed US stock prices are “on the cheap side”:
“We are not in bubble territory or anything of the sort. If interest rates were 7 or 8 percent, then these prices would look exceptionally high. (…) Measured against interest rates, stocks are actually on the cheap side. (…) If the 10-year [US bond yield] stays at 2.30% and stays there 10 years, you would regret not having bought stocks now.”
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The information contained in this article is General in nature and has been prepared without taking into account your objectives, financial situation and needs.