Via analysts at UBS on US equites. Thye argue there are seven conditions that need to be met for the formation of a stock market bubble.
Six of the seven have been met:
Number 7 is loose monetary policy, and while the Fed cut on Wednesday we are not there (yet, at least).
UBS:
Six of the seven have been met:
- the end of a structural bull market
- profits under pressure
- loss of market breadth
- a 25 year gap from the prior bubble
- retail investor participation
- a "this time is different" prevailing sentiment among investors
Number 7 is loose monetary policy, and while the Fed cut on Wednesday we are not there (yet, at least).
UBS:
- "What we are missing are benign monetary conditions"
- "Then some of the $6.6 trillion in money market funds could easily switch into equities"
- forecasts 35% chance of a bubble forming in 2025, the trigger would be ther FOMC eventually lowering rates enough, another 100bp lower is the UBS estimate