Pricey Stock Market May Bode Well for Long Term

The “price stock market and skinny bond yields of 2017” could pay off in the future, according to a recent Bloomberg article.

The article says that asset prices tend to be higher when unemployment is low. In a pricey market, it explains, businesses are not as tempted to buy financial assets such as bonds (for which yields will be low), so those businesses with capital are “more inclined to expand a business or start a new one—which means hiring people and paying higher wages.”

Arguing that the U.S. has acquired some “bad habits from the past few decades, when financial assets were seen as more attractive than workers,” the article asserts that “as expensive asset prices help to support the labor market, we’re starting to see employers and governments put more energy into workforce training to ensure an adequate supply of labor. This would help workers get better, higher-paying jobs, and it would lead to a more productive workforce.”

A “bad” environment for the stock market, the article concludes, signals good news for society on the whole. “You just have to look beyond the yield on your portfolio to see it.”