Stocks and bonds are on quite a roll, with the 30-year Treasury yield hitting a record low this month, and the S&P 500 index standing just 2 percent beneath its all-time peak.
So you might think this is a time of great optimism for investors. But that's not the case, says Nobel laureate economist Robert Shiller of Yale University.
"People are fundamentally worried about what kind of income they will have — or that their children will have — in 30 or 40 years,"
he told the Financial Times.
That represents quite a contrast from what he calls the "the millennium boom" in the financial markets during the late 1990s and the "ownership society boom" during the 2000-2007 period.
“They were both driven by some kind of enthusiasm and excitement about investing," Shiller said.
"This time it seems to be more about fear. It’s technology again, but it’s fear about technology, rather than elation about the opportunities."
He wonders how technology will change society in 20 or 30 years. “That’s the scary thing. I think people are spooked by that,” he said.
As a result, Shiller said ordinary investors are “bidding up bonds, they’re bidding up stocks too. There aren’t enough safe assets.”
And with all the distractions, he warns that the basics are being ignored.
“People are not saving enough. Not just individuals, but defined benefit pension plans are not putting enough in to support their promised benefits,” he said.
“We need livelihood insurance. Human capital is not protected at all. You can’t insure against changes in incomes in your occupation,” he said, referring to workers whose salaries have been driven lower by globalization and automation.
Meanwhile, former Morningstar analyst John Coumarianos says the strong rallies enjoyed by the stock and bond markets since the 2008-09 financial crisis are unlikely to continue.
"Stocks and bonds appear poised to deliver lower returns than they have. And, of course, cash currently yields nothing, guaranteeing a negative real or inflation-adjusted return for the time being,"
he writes on MarketWatch.
"Investors might think the strongest response to this situation is to take more risk. But taking extra risk in markets that already seem overpriced could result in severe losses. Instead, you must save more to meet financial goals."
As for stocks, they "will probably lag in the coming decade, because they are historically expensive," Coumarianos says.