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Is Your Money Safe From A U.S. Stock Market Crash?

The best temperament for an investor is serenity. While others fear the crash, buy and snap up bargains. If others are greedy, then sell and take home your profit. But what do you do when everyone's afraid, but markets keep going up? I saw this interview from Robert Shiller that shook my serenity. After all, I'm not as smart as the nobel prize-winning Yale economist. Still, I don't think the US market is about to crash.

Though p/e ratios are historically high, interest rates are historically low and look set to stay there (see my post on jobs, interest rates and quantitative easing). As long as markets expect low-to-normal nominal GDP growth, US market valuations don't look completely out of whack. If nominal growth speeds up, that growth will increase corporate earnings, bringing valuations back to normal. If growth drops and we get deflation, there will be a temporary crash, then a strong recovery as the Fed does QE4, but keeps us expecting inflation between 0%-2% for the long term. Read more