Approfondimenti
Sectoral Bubbles in U.S. Equities
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Global Multi-Asset Viewpoint
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maggio 30, 2021
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Sectoral Bubbles in U.S. Equities |
The U.S. and global stock markets have experienced one of the sharpest price run-ups ever seen in a 12-month period and have continued to make new highs seemingly every week. Enthusiasm for stocks has been growing notably in the past year, with record initial public offerings (IPOs), record retail participation, and parabolic performance in certain sectors such as clean energy, electric vehicles, crypto currencies and fast-growing software companies. With the stock market and many sectors near or at record valuations, this brings up the question of whether stocks are in bubble territory. As with many booms, much of the stock market enthusiasm has been driven by an improving economic outlook and strong prospects for revenue and profit growth in many segments of the market, but free money has also helped to fuel trend extrapolation and raw speculation. In this letter, we examine whether the stock market and certain segments within it have turned into bubbles, and what implications this holds for the future.
In his seminal work, Manias, Panics, and Crashes, originally published in 1978, Charles Kindleberger outlined his model1 for the progression of an economic and market cycle from inception to an eventual bust. Kindleberger’s cycle model is defined by five stages, and here we quote extensively from Kindleberger himself as his descriptions of each stage are full of insights and are superior to any summary or paraphrase.
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Head of Global Multi-Asset Team
Global Multi-Asset Team
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Managing Director
Global Multi-Asset Team
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