We constantly hear that we've made new highs, higher again, the bull market continues, and a stream of other seemingly endless frothy statements. One data point that is very popular is that the markets are up 300% in five years. Yes, the markets are up 300% from the worst financial crisis in world history. Yes things were frothy in the years leading up to the financial crisis. Financial engineering created a cesspool of money that was filthy but sold to be pure as the driven snow, with a AAA credit rating. Once the music stopped it was discovered that AAA stood for something that was worth nothing, or at the least significantly less.
Since the financial crisis there been many bankruptcies, bailouts and most if not all weak hands have been shaken out. Those that survived the financial crisis have reappeared leaner and meaner than ever before.
Besides the fact companies have survived the worst and are poised to have strong growth going forward now that things are starting to slowly get back on track for the US economy; currently with low interest rates the only real option available to investors are stocks.
It's important to keep things in perspective, yes the markets are up 300% from the financial crisis lows in early 2009. From a high of ~1576 on the S&P 500 in 2007 to the current level of around ~1950, the markets are up ~24%.
So the question is; is 24% in seven years a frothy return while keeping in mind the new found efficiency and financial strength of companies as well as the lack of alternative investments besides the stock market?