Berkshire Hathaway Chairman Warren Buffett said stocks are comparatively cheap based on where interest rates are.
“Measured against interest rates, stocks actually are on the cheap side compared to historic valuations,” Buffett told CNBC on Monday. “But the risk always is interest rates go up, and that brings stocks down.”
He said he has invested about $20 billion in stocks since shortly before the election.
“If interest rates were at seven or eight percent, then these prices would look exceptionally high,” Buffett said. The Federal Reserve last raised its benchmark rate in December, to a range of 0.50%-0.75%.
Stocks extended their rally last week, with the Dow Jones Industrial Average closing at a record high for an 11th straight trading session, the longest streak since 1987.
Even before the post-election rise, several measures of valuation showed that stocks are about as expensive as they were during the tech bubble. Stocks were considered expensive because the median price-to-earnings ratio was well above its historical average, indicating higher prices than are justified by the underlying earnings-based value of the companies.
Buffett said he had raised his stake in Apple to 130 million shares, more than double the amount held as of December 31.
As reported by Business Insider