Topic: How To Invest

What is Pat’s commentary for the week of May 12, 2015

Article Excerpt

One of the more reassuring aspects of today’s stock market is that investors generally are uneasy. They are apt to sell and push prices down on very slight provocation. After that, prices seem to go back up again. Last week, for instance, U.S. Federal Reserve Chair Janet Yellen was having a conversation with International Monetary Fund Managing Director Christine Lagarde before an audience at IMF headquarters in Washington. Ms. Lagarde asked Ms. Yellen about the possibility that the Fed’s rock-bottom interest-rate policy would lead to bubbles in financial markets. Ms. Yellen started out by saying, “I would highlight that equity-market valuations at this point generally are quite high”. Then, perhaps realizing that this comment could have unfortunate repercussions on the stock market, Ms. Yellen added, “Not so high when you compare returns on equity to returns on safe assets like bonds, which are also very low, but there are potential dangers there.” In response, the Dow Industrial average still fell 195…