The return of the Stock Market

It has been argued for long that the selection of asset class is much more important than any particular asset in that class. Thus it is more important whether you invest in property, gold, cash or share rather than what property or which shares. Though not completely true for shares, atleast property prices are seen to rise and fall together. (Fall in property prices? Long time since we saw that happen!)

Another general observation is that when people generally start thinking that a particular asset class cannot fail at all, there is certainly a bubble waiting to burst. It happened to the stock markets in India in 2007 and to gold recently. The same feeling still persists for property prices, especially in cities like Mumbai.

So it has been proved that gold is no longer a safe haven. Property market is too optimistic for its own good and a correction is due sooner or later. Cash is never an option with the inflation rates seen in India.

So the only major asset class which does not seem inflated right now is the Stock Market. Also, there has been a huge drop in the earnings expectations. Mood was generally pessimist till a little while back. However, money has already started flowing in after the gold prices dropped. Inflation seems to be ebbing giving hope for a rate cut by RBI further fueling the rise. 

With the failure (or predicted failure as for property) of other asset classes, the rise in the stock market may sustain well beyond what is currently seen as a 100 meter dash. There is a very high probability that we are standing at the start of a very strong bull run. So better be sure not to miss out on it!