Bubbles Are More ‘More Bubbly’ Than Ever, Warns BAML
This year’s 380 percent surge in bitcoin isn’t an anomaly, according to Bank of America Merrill Lynch. It’s symptomatic of a new era for bigger booms and busts.
From the Bank of Japan to the Fed, quantitative easing has plied the markets with almost $14 trillion of stimulus, driving more risk-taking by investors struggling to meet return targets as yields plummet. Recent surges in inverse volatility and cryptocurrencies have far outstripped advances in past bubbly assets such as Japanese equities, analysts at the bank said in a research note.
“Post the financial crisis, the largesse of central banks appears to be inducing quicker and steeper price gains in assets compared to the case historically,” analysts including Barnaby Martin said. “Speculative behavior in assets is cropping up more frequently and in more places than just credit markets.”
That isn’t to say that the bubbles are on the verge of popping, the strategists said. The bullish credit cycle will only end once major inflows cease; those will only abate if there’s an “inflationary shock” that alters the market’s benign view of rates, they said.
via Bloomberg News https://bloom.bg/2lsrIoJ
September 5, 2017 at 08:14AM