Asset allocation in a US stock market bubble

letitroll said:

If I were to steelman the other side.....one might argue that the stock market investors....are looking through current bond prices....to a future period when they return to much lower levels.....such that they are front running an expanding ERP by owning stocks now knowing that there is a bond rally to come. I'm not so convinced........i think the US has worked for so long....that its going through what has all the appearances of being a melt up.....as investor pull funds from across the globe in under-performing markets to pile into the asset class with the best 3,5,10yr record....SPY/QQQ....

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That seems likely. Nobody is currently talking about increasing interest rates- or as of yet a return to quantitative easing.

There are other elements to the equation though- economic factors of production. Of those labour is increasing and arguably so is enterprise. Technology (which effectively leverages land, labour, capital and enterprise) is advancing exponentially. All of which points to a growing world economy (Google says only 2 years of negative growth since 1961) in future, which will likely be much greater in those countries which have the greatest share of the factors of production- and it's difficult to argue that the US doesn't have the lions share of capital and technology, and its labour pool isn't exactly small either.

And it's also difficult to argue that the US doesn't encourage the growth of oligopolistic megacorps which dominate the stock markets. So US indices go up faster and attract more capital providing more opportunity growth etc in a feedback loop.

This isn't a voice in support of the US economic model- economy and society (ie people) are synonymous, and I'd far rather live in Europe with an excellent social safety net (which I've needed before and am likely to need again).

But while I hate the thought of living in the US, it's certainly where I put my money to work. Hypocrisy at its finest i admit.