Stocks Overvalued? Who Cares?

The milestone came at 10:10 a.m. on Aug. 25: The Standard & Poor’s 500-stock index edged above 2,000 for the first time, helping to push the value of equities worldwide to a record $66 trillion. The benchmark has tripled since March 2009, climbing at a blistering pace that has seen 65 calendar months elapse without a 10 percent loss in any of them.

For the average investor, it’s a dizzying peak from which to contemplate the eternal question: buy or sell? Arguing for the bulls on Aug. 19, Barry Bannister, the chief equity strategist at Stifel, dramatically raised his prediction of where the S&P will end the year. He had been forecasting a modest loss. Now he envisions a 15 percent climb to 2,300 as the economy picks up steam. “People are getting jobs, getting paid, becoming solvent,” Bannister says. On the bearish side, no less an authority than Yale University professor Robert Shiller, one of the few economists to have warned about the housing bubble, said in an Aug. 16 New York Times piece that his influential Shiller price-earnings ratio has reached a “worrisome level,” one not seen since 1929, 1999, and 2007—years that are synonymous with bursting bubbles.