Invest
Beware the microbubbles, expert warns
Investors are being warned that concerns about the sharemarket being overvalued are overblown, with microbubbles posing the imminent risk to investors, an expert has stated.
Beware the microbubbles, expert warns
Investors are being warned that concerns about the sharemarket being overvalued are overblown, with microbubbles posing the imminent risk to investors, an expert has stated.
The CEO of deVere Group, Nigel Green, said that despite global shares reaching an almost record highs on Monday, higher valuations should be expected.
He highlighted the large monetary and fiscal response to the COVID-19 pandemic, which has resulted in ultra low bond rates, and record-low interest rates which is leading to higher profits for businesses.
He also pointed out that institutions and retail investors with spare capital have little place to put their money, which is leading to a higher share prices.
“As stocks hit historic highs, there are fears that the boom we’re currently experiencing could end in a bust, similar to the dot-com era,” Mr Green said.
“For the time being, we believe that concerns over a large stock market bubble are overblown. To understand the reasoning, we need to look at why markets are valued so high at the moment.”
However, while highlighting a market downturn is unlikely, the investor pointed out that microbubbles of a small group of stocks that consistently rush to new highs against strong fundamentals are putting investors’ capital at risk.
“Hyper growth stocks, which often lure in do-it-yourself investors with their headline-grabbing current performance, at the moment appear to have no ceiling.
“However, highly profitable incumbents in their sectors could soon bring the ‘story stocks’ back down to earth, with their valuations headed for a meaningful correction.”
Another major risk of microbubble stocks, said the deVere boss, is that they overshadow the potential of new stocks and sectors, with investors subsequently missing key low entry point opportunities.
“There are also new businesses emerging which people, including myself, see as the future. Not all of these will succeed, of course, while some will rocket,” he noted.
“Therefore, investors should work alongside a good fund manager to seek out those stocks most likely to generate and build their wealth over the long term.
The CEO believes investors today should be more worried about the microbubble instead of a macrobubble.
“Any potential bursting of bubbles is likely to be within specific stocks, so unlikely to rock the global financial markets as has happened previously – but individual investors could still be caught off guard.
“Microbubble spotting, and diversification across asset class, sector, region and even currency, should become a priority for investors right now,” he concluded.
About the author
About the author
Stock market
Westpac 1H profits soar post-pandemic
Australia’s improving economic outlook has seen the profits of a big four bank surge, which is said to signal strong dividend gains across the market, an industry expert has revealed. ...Read more
Stock market
Limiting internet searches for investors ups likelihood of a stock market crash
Internet searching does not exacerbate investors’ biases – instead, it facilitates their ability to access and analyse information, new research has revealed. ...Read more
Stock market
Ethical investing tipped to drive ETF market
Following a volatile 2020 where investors poured into ETFs, shareholders are tipped to focus on ethical investing and technology as the recovery from the COVID-19 pandemic continues, an industry expe...Read more
Stock market
‘The concept of collective investing is here to stay’
The phenomenon of retail investors acting as a collective, led by social media and celebrity investors, is here to stay, says one expert. ...Read more
Stock market
What is short selling and should you do it?
Short selling stocks may sound like a good investment strategy when you’re after quick and big returns, but is it worth the risk? Here’s a rundown of why shorting stocks may not be a sound stock t...Read more
Stock market
How much insider trading really happens?
There are at least four times as many people who get away with insider trading than the number of those caught by prosecutors, new research has revealed. ...Read more
Stock market
Why you should be wary of the tech stock bandwagon
After a strong year of tech stock gains, tech shares have been on a decline in recent weeks as increasing bond yields rattle equity markets. ...Read more
Stock market
GameStop set to release first earnings since Reddit stock market rally
The video game retailer at the centre of the WallStreetBets saga is set to post its first quarterly market update since the fiasco began, with social-media investors heavily tipped to continue backing...Read more
Has the property market reached its peak; Biden’s climate summit and our sharemarket, and the upcoming budget
Listen now
Is the market overheating; should ETFs take your fancy, and what’s happening to the low and middle income tax offset?
Listen now
Home values up 30% (or are they); NFTs taking the world by storm, and why Keating thinks Aussies will be ‘poor’ in retirement
Listen now
Raging floods, the tech stock bubble and the ongoing SG debate
Listen now
Stock market
Westpac 1H profits soar post-pandemic
Australia’s improving economic outlook has seen the profits of a big four bank surge, which is said to signal strong dividend gains across the market, an industry expert has revealed. ...Read more
Stock market
Limiting internet searches for investors ups likelihood of a stock market crash
Internet searching does not exacerbate investors’ biases – instead, it facilitates their ability to access and analyse information, new research has revealed. ...Read more
Stock market
Ethical investing tipped to drive ETF market
Following a volatile 2020 where investors poured into ETFs, shareholders are tipped to focus on ethical investing and technology as the recovery from the COVID-19 pandemic continues, an industry expe...Read more
Stock market
‘The concept of collective investing is here to stay’
The phenomenon of retail investors acting as a collective, led by social media and celebrity investors, is here to stay, says one expert. ...Read more
Stock market
What is short selling and should you do it?
Short selling stocks may sound like a good investment strategy when you’re after quick and big returns, but is it worth the risk? Here’s a rundown of why shorting stocks may not be a sound stock t...Read more
Stock market
How much insider trading really happens?
There are at least four times as many people who get away with insider trading than the number of those caught by prosecutors, new research has revealed. ...Read more
Stock market
Why you should be wary of the tech stock bandwagon
After a strong year of tech stock gains, tech shares have been on a decline in recent weeks as increasing bond yields rattle equity markets. ...Read more
Stock market
GameStop set to release first earnings since Reddit stock market rally
The video game retailer at the centre of the WallStreetBets saga is set to post its first quarterly market update since the fiasco began, with social-media investors heavily tipped to continue backing...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
