The equities market and stock exchange traded funds are knocking on all-time highs, but investment guru Warren Buffett rejects the notion that the market is “too frothy.”
Over the past year, the SPDR Dow Jones Industrial Average ETF (DIA) rose 15.9%, SPDR S&P 500 (SPY) gained 22.7% and PowerShares QQQ (QQQ) increased 29.3%. Despite a slight correction earlier in the year, the broad markets are hovering around their all-time highs.
“I think we’re in a range, and it’s a big zone always, of reasonableness,” Buffett said in a CNBC article. “But stocks ought to be higher every ten years. There’s a plow back of earnings that goes back year after year. Stocks will become worth more decade after decade, not in any precise manner, not in an even manner or anything of the sort. But 10 years, 20 years, 30 years, stocks will be worth more than they are today.”
After a recent pullback in growth stocks, namely in technology names, some are concerned about a possible second tech bubble, especially in up-and-coming social media technology stocks. Buffett, though, does not give credence to claims of a bubble.
It’s not like the period before 2001 when “you could almost sell anything and capitalize eyeballs and all of that,” Buffett said in the article. “I don’t think it’s reached that point and certainly I don’t think the general market level is going to bubble up.”
In the tech sector, Buffett’s IBM (IBM) position has been weakening over the past week after the recent earnings report. However, Buffett does not believe the investment “soured,” pointing out that Berkshire has increase shares to the company this year and wouldn’t “rule out” future IBM buys. [Your Grandparents Would Like This Tech ETF]
IBM is a major component in the tech sector, accounting for 5.3% of Technology Select Sector SPDR (XLK) . The company makes up 7.5% of the Dow Jones Industrial Average ETF. [Favorable Seasonality Beckons for Tech ETFs]
SPDR Dow Jones Industrial Average ETF
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Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.