Flying high: Are stockmarkets in a bubble?
Flying high
Are stockmarkets in a bubble?
from The Economist
Share prices like the Dow Jones Industrial Average (US), the FTSE 100 (UK) & the MSCI World Index (global) are reaching the ever highest
Soared Snap’s shares & P/E ratio (getting closer to the level of the internet boom & just before 1929) are sending us warning signals
Investors ignore: 1) prosperity comes after a restraint (2015-16); they have more cash from mutual funds & see government bonds unattractive
2) there are indications of a pickup in the global economy after a feeble few years: South Korean exports; commodity prices; European growth
3) expectations for Trump’s tax cuts, infrastructure spending & deregulation; a low oil price may increase profits of S&P 500 by 12% in 2017
– US econ fell in Jan; the recovery is already long; fiscal-stimulus may be weaker; Trump’s immigration policy & trade sanctions harm growth
– FR may raise interest rates in Mar; ECB will decrease bond purchases in Apr; China’s big private-sector credit creation will be tightened
– Populism will be a menace to stock markets because it rejects globalisation. Stocks may fly high for a while, but investors should beware