By CCN.com: As the Dow edges toward new record highs, Warren Buffett says US stocks have plenty of room to run. But on one condition: that interest rates remain low.
It’s a big “if,” but one that US president Donald Trump is desperate to maintain. Trump has repeatedly called for a one percent cut in interest rates and slammed the Federal Reserve for moving in the other direction.
If Trump gets what he wants, and interest rates stay low, the Dow Jones Industrial Average (DJIA) is poised for much bigger gains.
Warren Buffett: “I Think Stocks Are Ridiculously Cheap”
Speaking to CNBC, Buffett said the current mix of high employment, five percent budget deficit, and ultra-low interest rates is like “Nirvana” for stocks.
“We’re sitting with very, very little inflation with a Federal Reserve that put a target for two percent on it not that long ago and it looks like Nirvana, it looks like we’ve found the promised land, where essentially money doesn’t cost anything and… you can have full employment and no inflation.”
This perfect combination of factors has sent the Dow Jones Industrial Average more than 30 percent higher in just two years. Buffett goes on to explain:
“Now, if [these conditions persist], then stocks are ridiculously cheap.”
Trump Demands Lower Interest Rates to Fuel Stock Market
Donald Trump is one figure who would like to see these “Nirvana” conditions persist. Last month the president said:
“We have the potential to go up like a rocket if we did some lowering of rates, like one point, and some quantitative easing.”
The president even called on the Federal Reserve to lower interest rates by one percent in order to fuel stock market growth.
China is adding great stimulus to its economy while at the same time keeping interest rates low. Our Federal Reserve has incessantly lifted interest rates, even though inflation is…