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First Trust Advisors’ Brian Wesbury argues people are overly concerned with global events and the politics instead of investing.
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Get about Washington in fact our next guest says stop talking about it investors should be focusing on making money in these -- -- the economy and corporate profits are helping.
If you have brown let's -- chief economist at first trust advisors joining us now.
From Wheaton Illinois star with this that -- Why he can you possibly say don't worry about Washington.
Because of long term interest rates go up stocks are not gonna be undervalued they will not be cheap and that could hurt the stock market.
Well you know date in this is that it's a great point you're making but we put believe it or not we put -- 5%.
Ten year treasury yield into our stock market model in other words.
We're assuming interest rates so -- from here and stocks are still.
Undervalued today so we can take a lot higher long term interest rates but my real point about this is.
If we go back a few years we had the first fiscal cliff right that 2010.
-- attacks.
Cuts we're gonna end that we had the first debate over the debt ceiling we had the debt downgrade.
All of those things happened and yet the market kept going up the same with the fiscal cliff this time.
And I believe people are overly concerned about a lot of the things that are happening around the world that.
The economy continues to grow.
The stock market is really cheap and that's what I think investors should focus on 40% undervalued you say.
Yeah 40% undervalued this -- -- -- If we go back to march of of 2009.
That was the bottom of the stock market and it.
I believe the thing that they put the bottom -- was when we changed mark to market accounting we no longer forced it.
On financial enterprises.
And that's when the stock market bottom since then the market is up about about a 120%.
With the dividends included.
And profits are actually up at least that if not more than that so the stock market today is as cheap.
As it was at the bottom.
In march of 2009.
That 5% yield on the ten year that you factored in though is that a cause of economic growth.
Because is it possible that we get back to that level because of screw ups in Washington because they don't deal with the debt.
Because investors turn their backs on loan in on says in nation money in the economy main town.
Well stinks to high hat.
Yes sure you know -- date indicated that the United States still even with our sixteen trillion dollars in debt.
Even -- trillion dollar annual deficits is still this one of the safest if not the safest.
Credit in the world that doesn't mean we won't have problems.
In the future.
But what we believe is that interest rates are being held artificially low today by the Federal Reserve you know 0% short rates.
They've promised to hold them there right dash for the rest of our lifetimes they promised.
And that means the whole yield curve has come down and these are artificially low rates and I believe that rate should be up.
Probably somewhere in the three to 4% range that's where they would be if the Fed wasn't.
Messing with the interest rates.
And and I think it even if you put those interest rates into a stock market valuation model.
That the market is still forty to 50%.
Undervalued today and there you have it right it was great to see thank you so much -- went very have a great weekend -- -- see very and I house.
