RSS The Federal Reserve saved US equities from a bubble (but there's still a chance!)

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 RSS The Federal Reserve saved US equities from a bubble (but there's still a chance!)

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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:

  1. the end of a structural bull market
  2. profits under pressure
  3. loss of market breadth
  4. a 25 year gap from the prior bubble
  5. retail investor participation
  6. 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
This article was written by Eamonn Sheridan at www.forexlive.com.
 
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