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Low Interest Rates Driving the Market’s Rally?

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  • Description

    Moody’s Chief Economist John Lonski on the state of the U.S. stock market.

  • Duration 4:38
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Things -- joining us now with his outlook on -- markets and the economy.

John Lonsky he's chief economist of Moody's capital markets good to have you here.

They hear these these earnings numbers I have to say that's pretty impressive surprising to the upside 69%.

If -- did not know better.

One would think that those expectations have been manage somewhat.

That's always -- case in -- I forget that the but the game we're talking about.

-- 4% year over year increase by -- -- has Apollo were to propel.

The equity market to new highs fairly soon seems to be somewhat incredible we can't forget how when what -- Of -- low interest rates are to do so rally well.

I certainly Ben Bernanke isn't for getting and these persuaded apparently -- a few more of his friends on the FOMC -- come to his view.

Even other some holdouts they wanna start talking about raising rates I think -- out of their minds what do you think.

Like the big.

Brett will not be consumer price inflation if they stay with low interest rates were to launch the big threats going to be.

Financial asset price inflation.

Of some sort perhaps the equity market that it's -- so -- over valued -- Other the equity market -- into this latest overvalued.

It's not a -- it's it's -- -- now but what's to stop the equity market from rising.

By another tended to.

You'll love the fact that there feel like Bill Gross and the the other fellow or there you.

What's his name issues the -- -- whatever it is.

Just -- that's it.

-- -- they're talking about down the equity market are talking up the bond market if I didn't know better and they keep.

-- an -- out what a joke is that.

Of course you the bond market is gonna find it is a bond guys talked about the equities market and what do you expect each well that's what I understand is why people wouldn't cover that -- asset.

Look good deal ultimately the problem with the bonds would be that if you that the equity market keeps going higher this starts to help the economy out.

But obviously bond yields are going to be moving up to the two and a half 3% range.

And and we can put it another way some people were watching prices are gonna watch -- fall over there aren't that yeah that's right and and that's not helpful to them at all.

Not at all.

But they want to keep believing.

A that this latest rally by equities and -- -- continuation of very low borrowing costs won't supply much support to the real economy.

That's not necessarily going to be the case but our primary is there anyone out there including our Bill Gross all of the folks at Pimco and other.

The notes of interest in name Pimco.

Every the idea.

That it would be in everyone's benefit to see an appreciation -- the equities market the wealth of back.

Actually see some good things happen -- love these de.

Our blog guys silly companies get what it comes down to is that the entire point.

Of which Roy they -- monetary accommodation by the Fed is to drive interest rates lower so equity prices move higher so people -- spend more.

At the ultimate cost to the bond market major -- rally.

Hi bill most of all the boys and girls are repentant -- by the nape of the neck and say we're gonna take -- where your money.

There we're gonna put equities is that what Bernanke tried to say that's -- -- -- at it.

How high does this market stock market go.

Okay were up -- 7% right now and there's a good chance -- by year's end will be higher by at least.

15%.

There's more to come.

In terms of this rally especially if that burning -- Keeps that ten year treasury yield close to 2% well if we continue to see unemployment rises since -- it's been doing here up to seven point 9% today he's gonna for the he's gonna have to keep -- -- -- still a lot of slack in the economy and don't be surprised if this high level of unemployment eventually put some downward pressure on wages and salaries well.

Theory here is if it's saturating to think that the president yesterday killed the jobs council today we get seven point 9% unemployment.

-- we watch you know we're watching people in this labor force we're looking at labor force participation.

They -- if this were the same levels -- -- Washington office we be looking at ten point.

But -- sixteen point 8% that's right killers are unemployed -- past five years the ranks of the jobless are up by warning half million.

Number of jobs is still off by 3.2.

Million despite those upward revisions -- payrolls lord god give us the leadership from Washington thanks so much -- thank you appreciate it.

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