Don’t be deceived: Stocks are in a bubble (Reuters TV)

July 24, 2012 at 10:04 AM
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Harvard economist Martin Feldstein is concerned that the stock market might be in a bubble. The extremely low interest rates on long-term investments, such as treasuries, are forcing people to look to the stock market to get some yield. "But those interest rates are likely to rise, so we've got a bubble in the long-term bond market," Feldman says. At some point, he says, we'll return to normal rates, which will make equities less attractive. An improving economy could actually make the bubble worse because long-term rates could go up. "I don't think that an improving economy, per se, is going to help the stock market," Feldman said. "It certainly won't help the bond market."