MarketWatch – Stocks are pricey, but could keep climbing on ‘the Trump story,’ says Robert Shiller

Critical information for the U.S. trading day


The S&P 500 is cruising toward a weekly win, and it just needs a gain of 0.3% today to notch yet another record close.

So what’s the deal, given all those worries around trade, the Fed and Apple’sAAPL, +2.42%  iPhone prices?

“Investors should of course be mindful of the risk of further crises,” says The Economist, as it reflects on markets ahead of tomorrow’s big anniversary — 10 years since Lehman flopped.

“But they should also keep in mind the possibility that things might turn out just fine,” the British magazine adds. That’s even though “looking on the bright side does not have the same intellectual cachet as forecasting calamity.”

Nobel Prize-winning Yale economist Robert Shiller doesn’t need that cachet, apparently. He’s sounding rather cheery, as he serves up our call of the day.

The stock market is “highly priced,” but “it could get much more highly priced,” the Shillster said in a Bloomberg TV interview.

There is an emotional, irrational element to the S&P’s strength, according to the econ professor.

“It has something to do with our president, who is an exceptionally business-oriented president and who wants to deregulate and who favors lower taxes,” he said.

“That has an effect on the market, but I think it goes beyond the rational, logical effect, and it has something to do with our animal spirits. The U.S. is just doing great right now, in terms of the strength of the economy and the stock market.”

“That is kind of psychological, kind of built around the Trump story at this point in history,” Shiller added.

The market’s cyclically adjusted price-to-earnings ratio — a metric that Shiller helped make famous — has climbed to a relatively lofty level, reaching the low 30s. But the CAPE crusader noted in the interview that it topped 45 in 2000, implying it still has room to run.

To be sure, the Nobel laureate offered warnings, as he did in March, when he cautioned President Trump could bring about an economic crisis.

“It’s kind of a risky market now, and I wouldn’t over-expose myself to it,” Shiller said.

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