Via analysts at UBS on US equities. You argue that there are seven conditions that must be met for a stock market bubble to form.
Six of the seven have been met:
-
the end of a structural bull market
- profits under pressure
- loss of market scope
- a 25 year gap from the previous bubble
- participation of retail investors
- a “this time is different” feeling among investors
Number 7 is loose monetary policy, and even though the Fed cut on Wednesday we're not there (yet, anyway).
UBS:
-
“What we're losing is being in inappropriate financial situations. “
- “Then some of the $6.6 trillion in money market assets could easily move to equities”
- predicts a 35% chance of a bubble forming in 2025, the trigger is that the FOMC would eventually cut rates enough, another 100bp below the UBS estimate
