Dwyer said that few had expected stocks to rise so quickly throughout the year.
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“One of the things I want to address is: People get so wrapped up on whether the market is overvalued, undervalued or fair. That’s not relevant,” he said. “What’s relevant is what changes the direction of the underlying trend in valuations. And when you’re in an uptrend in valuations in a nonrecession environment, it’s one thing: Fed policy. And Fed policy of tapering does not change the interest expense on existing debt, which is what crushes economic activity because we have so much variable-rate debt.”
Addressing whether a bubble was forming in technology stocks, Dwyer used the example of Netscape, which went public in 1995. It was priced at $14 per share, he noted, raised to $28 before its initial offering and ran up to $57 per share.
“Anybody today would look at that and say, ‘Wow, that’s a bubble,'” he said. “This thing is just getting going.”
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Longer-term, Dwyer said the market appears to have upside for the next couple of years.
“Historically, you don’t get recessions in the U.S. without an inversion of the yield curve. We’re at 16 times earnings in a sub-3 percent core inflation environment. Historically should be at 19 times,” he said.
The next few years of improving incomes and more stable economic growth would lead to a surge of household formation akin to the baby boomer generation, Dwyer said.
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“What I do know is this yield curve is not going to be inverted for at least two more years,” he added. “You’ve never gone into a recession post-World War II without an inversion of the yield curve.”