Is the retail frenzy a sign that the market is almost at the top?
Edward Smith, head of asset allocation research at UK investment firm Rathbones, is skeptical.
‘Often in some corners [of the market] things get carried away, “he said. In the shortest names, it is clear today. “
Historically, bubbles in the broad market have been preceded by a rise of 300% or more in the three years before it popped up, which is the much higher progress in U.S. equities over the past few years, Mr.
The valuations of US equities are high by historical standards. “But the investors who apply an average return approach to valuations are being misled,” he said. Smith said. “We live in a world of structurally low interest rates that has been exacerbated by Covid but not caused.”
“Structurally lower interest rates mean structurally higher valuations,” he added, saying future profits are worth more in present value than the rate at which they are discounted.