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Category: Money

Fed Economists: There is a 15-year Bear Market Ahead

Written on August 24, 2011 by Japhet Writ

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Equities will be 20% higher than 2010, but these implications will not be felt until 2030.

from San Francisco came out with a research paper, relating the baby boomers and . It is said that the boomers will divest on , as they retire and eat into their savings.

The authors of the research paper, and , tried to quantify the implications. Their principal conclusions states:

“We find that the actual P/E ratio should decline from about 15 in 2010 to about 8.3 in 2025.

The model-generated path for real stock prices implied by demographic trends is quite bearish. Real stock prices follow a downward trend until 2021.

On the brighter side, as the M/O ratio rebounds in 2025 (BK: M/O = Baby Boomers die), we should expect a strong stock price recovery. By 2030, our calculations suggest that the real value of equities will be about 20% higher than in 2010.”

Do you agree with Zheng Liu and Mark M. Spiegel’s conclusions? Do you also see a bear market in the years to come?

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