A Frequent Flyer's View of the Market

Mayer, Charles
May 1999
Journal of Financial Planning;May99, Vol. 12 Issue 5, p64
Academic Journal
This article assesses the state of the market in the U.S. in 1999 using the frequent flyer perspective. The frequent flyer perspective recognizes the profound changes that have occurred in the markets and economy over the last decade. The democratization of the markets has helped both the economy and new investors. Overall, U.S. companies have made good use of invested capital, while those supplying it have enjoyed healthy returns. Still, the markets have acquired some potentially troubling characteristics following the flood of new money. Many of these appear related to the extreme views of the markets and economy promoted in the popular culture. These views have probably mixed with the fascination over the dawning millennium; significantly, most of the fears surrounding the ramifications of the Y2K software problem have revolved around the possibility of a financial collapse. The incredible volatility in Internet stocks is perhaps the most outward manifestation of this market millennialism. However, several factors have come together to support the market: 1. Earnings driven by productivity, restructuring and new technologies; 2. Low inflation driven by an easing Federal Reserve policy and globalization, and 3. High multiples driven by demographics, and liquidity.


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