The markets are starting to look bubble-like, according to a top Bank of America strategist.
In a new interview with Bloomberg, Michael Hartnett, the bank’s chief investment strategist, points to surging prices in crypto, the “Magnificent Seven” tech stocks and AI-related equities.
“I mean there’s tremendous euphoria. The euphoria’s there because of the Fed. The Fed wants to cut rates, come what may, and the markets are frontrunning that in gold, crypto, in equities, and even in corporate bonds.
But a bubble is when too much money chases too few goods and everyone wants chips and there’s a lot of money chasing that, and yeah, I think it has characteristics [of a bubble] in terms of price, the speed of the movement, the valuation, the breadth. Bubbles are narrow, bull markets are broad, and this isn’t very broad.”
The “Magnificent Seven” tech stocks include Microsoft, Amazon, Meta, Apple, Alphabet, Nvidia and Tesla.
Hartnett notes the bubble “doesn’t necessarily have to pop right now,” but he says the macroeconomic data in the US is looking ominous, particularly in the labor market.
“There’s no doubt that the labor market is cracked in the US. At the same time, there isn’t a human being in America who thinks inflation’s going to 2%. Because it’s not. It’s stuck between 3 and 4%.
So that backdrop of inflation coming in a little higher than expected and growth coming in a little weaker than expected, that’s normally not good for risk assets, but if risk assets say ‘We don’t care, we’ve got AI and all this sort of stuff,’ that is very symptomatic of the sort of bubble mentality.”
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