Invest
Stock market bubble fears overblown: Vanguard
Fears of a stock market bubble are “overblown” despite equity markets around the world closing in on all-time highs, an industry analyst states.

Stock market bubble fears overblown: Vanguard
Fears of a stock market bubble are “overblown” despite equity markets around the world closing in on all-time highs, an industry analyst states.

With the ASX 200 just a couple of hundred points behind its record high set last year and the US market surpassing its pre-pandemic highs, Vanguard’s senior economist Alexis Gray believes the 10-year projection for domestic and international equities has improved in 2021, compared with last year’s figures.
“Despite the pandemic, the downturn and the recovery, we actually see valuations are somewhat fair and there’s an improved outlook for equities.
“And therefore this concern about a bubble, in our view, is overdone,” she said.
APAC chief economist Qian Wang also believes valuations are still “fairly valued” despite COVID-19 continuing to impact world markets.
“One thing across the world is the equity market has rebounded quite notably last year, despite all the uncertainty associated with the virus and the incomplete economic recovery,” Ms Wang said.
“However, because interest rate and inflation have also become much lower, we find that equity values, despite expanding, are actually still reasonable.”
Chinese market fears are also overblown
Vanguard also believes the much publicised political strain between Australia and China is unlikely to have a meaningful impact on Australia’s economic outlook in 2021.
“I think unfortunately last year the relationship between the two countries deteriorated somewhat… But overall the size of the tariffs and the size of the goods market is overall not that large – around 1 per cent of GDP, possibly even less, is the overall damage from the imposition of those tariffs,” said Ms Gray.
“We would need to see more tariffs to start to hurt – for example, if China were to put tariffs on the larger exports like coal and iron ore. The tricky thing is it’s hard for China to substitute for ways to purchase iron ore, because there aren’t many producers in the world that can meet China’s demand.”
China could find other ways to penalise Australia, but Ms Gray believes that there is currently a desire to come to an agreement and reconcile, saying: “The tone has shifted in recent weeks.”
However, the US-China relationship will remain contentious in the future and is “definitely less favourable” than in the past, said APAC chief economist Qian Wang.
“US-China relations will probably get better compared to the last four years, when you think about the new US president Biden – he’ll take a more balanced approach to competition and collaboration… but frankly speaking, the game is still on,” Ms Wang said.
“The US-China tension is a long-term game in nature, given the fundamental discrepancies between the two countries on many critical issues… a multilateral approach means the US will work with its allies to contain China, and the focus will shift away from trade to other structural issues such as market access, technology, geopolitics and human rights.”
About the author

About the author


Stock market
Markets succumb to jitters as US CPI maintains strength
Following a slight drop of 0.2 per cent in the United States inflation rate, the latest US April consumer price index (CPI) data indicating higher than expected figures has triggered a fall in the US ...Read more

Stock market
Qantas forecasts return to profitability, announces ultra-long flights
Qantas expects its net debt to condense from $5.5 billion at the end of 2021 to $4.5 billion at the end of April following a period of sustained recovery in travel demand. ...Read more

Stock market
Headwinds to outnumber tailwinds in 2022
Headwinds are likely to outnumber tailwinds in 2022 as the world continues to readjust to the post-pandemic era, one expert has said. ...Read more

Stock market
Aussies can now net frequent flyer points by trading stocks
Superhero is looking to sweeten the deal for traders who are excited for the return of international travel. ...Read more

Stock market
Facebook debuts new name
Zuck gets meta. ...Read more

Stock market
2 big questions investors should ask as Australia reopens
Investors need to stop thinking about how to profit from the mineral sector’s struggles, and start looking at when the best time to ride the recovery will be. ...Read more

Stock market
Trading app popularity skyrockets as retail sector booms
In 2021, trading has never been easier for retail investors, meaning the number of users on trading applications has exploded to an all-time high. ...Read more

Stock market
ETF rush predicted to intensify
The Australian ETF sector advanced AU$6.3 billion in August to hit a new milestone, as its popularity among financial advisers soared. ...Read more

Wrapping up an eventful 2021
Listen now

What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now

Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now

Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now

Stock market
Markets succumb to jitters as US CPI maintains strength
Following a slight drop of 0.2 per cent in the United States inflation rate, the latest US April consumer price index (CPI) data indicating higher than expected figures has triggered a fall in the US ...Read more

Stock market
Qantas forecasts return to profitability, announces ultra-long flights
Qantas expects its net debt to condense from $5.5 billion at the end of 2021 to $4.5 billion at the end of April following a period of sustained recovery in travel demand. ...Read more

Stock market
Headwinds to outnumber tailwinds in 2022
Headwinds are likely to outnumber tailwinds in 2022 as the world continues to readjust to the post-pandemic era, one expert has said. ...Read more

Stock market
Aussies can now net frequent flyer points by trading stocks
Superhero is looking to sweeten the deal for traders who are excited for the return of international travel. ...Read more

Stock market
Facebook debuts new name
Zuck gets meta. ...Read more

Stock market
2 big questions investors should ask as Australia reopens
Investors need to stop thinking about how to profit from the mineral sector’s struggles, and start looking at when the best time to ride the recovery will be. ...Read more

Stock market
Trading app popularity skyrockets as retail sector booms
In 2021, trading has never been easier for retail investors, meaning the number of users on trading applications has exploded to an all-time high. ...Read more

Stock market
ETF rush predicted to intensify
The Australian ETF sector advanced AU$6.3 billion in August to hit a new milestone, as its popularity among financial advisers soared. ...Read more