Stock market bubble fears overblown, micro-bubbles are the issue

Concerns over a large stock market bubble are currently overblown – it’s the micro-bubbles that could pose more imminent risks to investors, warns the CEO of one of the world’s largest independent financial advisory and fintech organisations.


 


The warning from Nigel Green, chief executive and founder of deVere Group, comes as global shares reached almost record highs on Monday.


 


MSCI’s All Country World index, which tracks stocks across 49 countries, was up 0.2% on the day.


 


Mr Green says: “As stocks hit historic highs, there are fears that the boom we’re currently experiencing could end in a bust, similar to the dot-com era.


 


“For the time being, we believe that concerns over a large stock market bubble are overblown. To understand the reasoning, we need to look at why markets are valued so high at the moment.


 


“Essentially, it is down to the unprecedented levels of monetary and fiscal support, the ultra-low bond yields, the historically low interest rates, that earnings are up, and that both institutional and retail investors have large reserves of excess cash.


 


“This is a rare combination and, on the back of all this, it can be expected to take years for markets to cool significantly.”


 


He continues: “What is perhaps more concerning are micro-bubbles of a small group of stocks that consistently rush to new highs and reject all balanced valuations.


 


“Hyper growth stocks, which often lure in Do-It Yourself investors with their headline-grabbing current performance, at the moment appear to have no ceiling.


 


“However, highly profitable incumbents in their sectors could soon bring the ‘story stocks’ back down to earth, with their valuations headed for a meaningful correction.”


 


Another major risk of micro-bubble stocks, says the deVere boss, is that they overshadow the potential of new stocks and sectors, with investors subsequently missing key low entry point opportunities.


 


“There are also new businesses emerging which people, including myself, see as the future. Not all of these will succeed, of course, whilst some will rocket,” he notes.


 


Therefore, investors should work alongside a good fund manager to seek out those stocks most likely to generate and build their wealth over the long-term.


 


Nigel Green concludes: “In today’s landscape, it is not the macro-bubble of which investors should be wary. 


 


“Any potential bursting of bubbles is likely to be within specific stocks, so unlikely to rock the global financial markets as has happened previously – but individual investors could still be caught off-guard.


 


“Micro-bubble spotting, and diversification across asset class, sector, region and even currency, should become a priority for investors right now.”

Facebook
Twitter
LinkedIn
Reddit
Email

The deVere Group of Companies, is licensed in various jurisdictions, however, the products and services offered by the respective entities may vary per jurisdiction. The deVere Group does not warrant, either expressly or implied, the accuracy, timeliness, or appropriateness of the information contained on this website. The deVere Group disclaims any responsibility for content errors, omissions, infringing material and any responsibility associated with relying on the information provided on this website. For more country-specific products and services offered by the deVere Group of Companies, you may wish to visit the specific national deVere website, if and where available. The information contained in this website is for general guidance on matters of interest only. The application and impact of laws can vary widely based on the specific facts involved and your country of residence. Before making any decision or taking any action, you should consult a deVere Group Financial Advisor.

© 2010 – 2022 deVere Group. All rights reserved.

© 2010 – 2022 deVere Group. All rights reserved.

Tell Me More