The equity premium has been slim during earlier periods of stable prices. Perhaps even more important, the stock market is at nosebleed levels because investors believe there is more good news to come, not because they believe equities are no riskier than bonds over the long haul. Investors are thus making a risky bet on stocks. The market's gains have been largely fueled by an enormous surge in corporate profits, quiescent inflation, and the spread of capitalism worldwide. Auto, oil, and other industrial heavyweights held sway.
Recessions are part of a capitalist economy.
When one arrives, bondholders will still have first dibs on cash flows, and equity holders will bear the brunt of losses. It has little to do with the notion that equities are riskless. There's no charge to see this list of stories. A small payment is required only if you decide to view any specific article. The McGraw-Hill Companies Inc. All rights reserved.