Moody’s just announced a monster downgrade of global banks.But Vanguard Group founder Jack Bogle – a long-term investor who doesn’t pay too much attention to short-term trading – told CNBC that the downgrade’s shouldn’t come as much of a surprise or cause too much of a reaction.
Here are the comments he made while everyone was waiting for the announcement:
“Anybody surprised when we get these downgrades …is someone who isn’t listening to your show or reading the Wall Street Journal.
We know it’s coming I would guess that the reaction may be over emphasised in advance and that less will happen than you might think. But that’s what the investor has to balance out. Will the world economy more than any other factor be a hospitable place for equity investment over the next decade. I believe it will be and that’s because the only reasonable option bonds and the yields in bonds are not very good.”
Bogle went on to say that moments of market disappointment or bearishness are not the right time to make investment decisions. In fact given the recent market volatility, he said, “this is a great day for buyers and a terrible day for sellers but it’s always good for somebody depends on your point of view.”
That being said Bogle is concerned about stocks in the long-run because many of today’s concerns are longer-term structural problems. While he says this time is different from previous downturns when valuations were excessive, he is telling people to be cautious:
“Valuations were just extremely excessive, that’s not the problem today. I don’t believe it is anyway. The problem is the underlying intrinsic value of stocks is reflected in the world’s economies. So i think this time is somewhat different. They’re never totally different of course and it’s a time when even Bogle is concerned about the economic outlook well ahead. So, I’ve been cautious, I’ve advised people to be cautious but i would never tell anybody get out of equities.”
Watch the entire interview at CNBC:
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