Forget buy low and sell high in this “everything boom” economy
Investors typically want to buy low and sell high to maximize profits. But, according to New York Times economics correspondent Neil Irwin, that's difficult to do now in what he calls the "everything boom" economy.
"Around the world, nearly every asset class is expensive by historical standards," writes Irwin in a recent New York Times column. "Stocks and bonds; emerging markets and advanced economies; urban office towers and Iowa farmland ... [all] trading at prices that are high by historical standards relative to fundamentals." The result, according to Irwin is "relatively low returns for investors."
Irwin tells Yahoo Finance in the video above that two basic trends are driving up asset prices and driving down investment returns. He says one factor is the very accommodative policies of the world's central banks. "They have been printing money like it's nobody's business for more than 5 years.”
The other key factor is what Irwin calls, “the glut of global savings” that companies are holding onto instead of reinvesting. “The global supply of savings is larger... than what companies want to invest," he says.
So what's an investor to do? According to Irwin, there's really not much they can do to reap strong gains, although stocks and other riskier investments will still likely yield better returns than safer investments like treasuries. But he cautions that investors should not expect big returns on stocks either given the 30%-plus gains of last year which essentially "cannibalized future returns."
Maybe all investors can do is lower their expectations.
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