Marc Faber, of the “Gloom, Boom, and Doom Report,” and Jeremy Siegel of the Wharton School agreed that buying equities is the right investment plan now, in a video interview with CNBC.
Here is what Faber had to say about the stock market against the bond market.
Everything looks bad at the current time and people are relatively bearish. At the same time you have the 10-year note at less than 1.5 per cent, and you have stocks like Johnson & Johnson yielding 4 per cent. I’m not saying that Johnson & Johnson won’t go down with the rest of the market. I’m just saying if you have a time horizon of 10 years, that you’re going to make more money in Johnson & Johnson than U.S. Government Bonds.
In response, this is what Siegel had to say.
Yes, I certainly agree with that. This is the first time in 60 years that the dividend yield on the market exceeds long term interest rates. It’s the first time in 60 years that you don’t need gains in stocks to have a higher return than gains on bonds. You don’t have to worry about the day to day volatility if the corporation has good coverage on its dividends, because it’s going to pay. That’s a very special position for the stock market to be in. And I agree completely with that for long term investors.