Asset Allocation Strategy
Bubble Trouble?
Mon 8th February, 2021

The past year has seen some spectacular performances in a concentrated number of equity sectors and some alternative asset classes.

US tech and Bitcoin are two noteworthy examples, and more recently we have seen a spectacular rise in heavily shorted US stocks and also the price of silver (the second surge in 12 months).

Bubbly price moves are raising concerns that many markets are becoming detached from reality and vulnerable to a major reality check. Indeed some commentators have gone as far as to label the entire US equity market as being in extreme bubble territory.

Just how big and how widespread are valuation excesses and how vulnerable are risk assets to a significant unwind? Moreover, why are we seeing a run of parabolic moves in certain asset classes?

We look at the ingredients in the mix for potential asset bubbles, exploring the general strength of equities and some of the explosive moves in other areas of the financial markets, including:

  • The US short squeeze
  • The Bitcoin narrative
  • The recent move up in the silver price.

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    This document has been prepared by Wilsons Advisory and Stockbroking Limited (AFSL 238375, ABN 68 010 529 665) (“Wilsons”) and its authors without consultation with any third parties, nor is Wilsons authorised to provide any information or make any representation or warranty on behalf of such parties. Any opinions contained in this document are subject to change and do not necessarily reflect the views of Wilsons. This document has not been prepared or reviewed by Wilsons' Research Department and does not constitute investment research. Wilsons makes no representation or warranty, express or implied, as to the accuracy or completeness of the information and opinions contained therein, and no reliance should be placed on this document in making any investment decision. Any projections contained in this communication are estimates only. Such projections are subject to market influences and contingent upon matters outside the control of Wilsons and therefore may not be realised in the future. Past performance is not an indication of future performance.

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    Written by

    David Cassidy, Head of Investment Strategy

    David is one of Australia’s leading investment strategists.

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