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2014 markets - bubble or not?

Friday, January 03, 2014 - 02:19

Jan. 3 - Against a backdrop of tapering by the U.S. Federal Reserve and a pick-up in the global economy, investors are moving massive amounts of money out of bonds and into equities. But with stock prices already peaking at record highs, could equity and other markets be heading for a rough ride or even a bubble? David Pollard reports.

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U.S. and Asian stock markets may have paused in their long march upwards as they opened after the New Year, no doubt taking a breather after the record gains of 2013. Europe appears more dogged. The Dax opened its first session with yet another record high. Traders there, like Oliver Roth of Close Brothers, are confident the good times will just go on. SOUNDBITE (English) OLIVER ROTH FROM CLOSE BROTHERS SEYDLER BANK AG, SAYING: "We had a real good stock season in 2013 and we are expecting the same environment in 2014 at least for the beginning of the year. The interest rates will stay low, more or less, and therefore we are quite positive for the year 2014." The more positive growth story - mainly coming out of the U.S. - is keeping markets buoyant. That, and the first, tiny step towards easing back on bond purchases that the U.S. Federal Reserve has taken. So called 'tapering' is pushing investors out of bonds - a disappointing performance by emerging markets like India and Brazil adding to the pressure. The big gainers: equities in developed markets. But could that pressure be forming the kind of bubble seen recently in, for example, gold? Brenda Kelly of IG says, if anything, stocks could ease. SOUNDBITE (ENGLISH) BRENDA KELLY CHIEF MARKET STRATEGIST, IG, SAYING: ''Since March 2009, we have been in quite an exceptional bull market both in the U.S. and, of course, here in Europe. So to expect something similar would be something of a miracle, particularly in light of the fact that we can't expect the same amount of easy monetary policy from the likes of the Federal Reserve.'' If not equities, could we see bubbles elsewhere? Some see signs of them in recent valuations for anything from the Twitter IPO to the price of Bitcoin. And in the UK, bubble talk is warming up a hot topic of old: whether property prices are climbing too high, too fast. Latest data shows prices last month put in their biggest jump in over four years. Although that's not entirely bad news, says Jeremy Stretch of CIBC. SOUNDBITE (English) CHIEF FX STRATEGIST AT CIBC, JEREMY STRETCH, SAYING: ''I think we shouldn't be too sniffy about where growth is coming from as far as the UK is concerned. Because if we are going to see growth in the housing market pick up, that does see associated industries also benefitting, and I think that ultimately will provide a more virtuous circle for the UK economy, helping to encourage business investment to pick up.'' Good or bad, bubbles or not, one thing on which there's general agreement: at the end of 2014, markets will look very different to how they look now.

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2014 markets - bubble or not?

Friday, January 03, 2014 - 02:19