Wall Street bankers warned of toppy stock markets and a looming near-term retreat after exuberance from unprecedented economic stimulus has led to “frothy” asset prices.
BofA’s latest weekly fund flow data on Friday reflected some of that sentiment, with investors storming into money markets and gold funds while pulling some money out of emerging markets that had attracted billions of dollars over the past 16 weeks.
U.S. stocks, however, were the standout performer with inflows of $10 billion.
In the week to Wednesday, cash funds attracted $29.1 billion and gold $1.5 billion, marking the largest inflow since August, the U.S. investment bank said.
“Sell the vaccine: frothy prices, greedy positioning, inflationary and desperate policymakers, peaky China and consumer all ultimately (a) toxic brew in 2021,” said BofA’s chief investment strategist Michael Hartnett.
The recent buying spree has sent U.S. stock valuations soaring to 23 times 12-month forward earnings – levels hit during the peak of the dotcom bubble in the late 1990s. The numbers prompted Citi to downgrade the region to “neutral” from “overweight” on Thursday.
Citi, however, was bullish on British and emerging market stocks, citing “reasonable” valuations.
BofA said the 2020 trend to “buy everything” had trickled into 2021, but it expects a slowdown in risk assets as “policy, positioning and profits” peak around the end of the first quarter.
Goldman Sachs’ Chief Executive David Solomon said he was preparing for more stock market volatility, particularly in the near term, and sees some “excess in markets”, Axios reported on Thursday.
‘SPECULATIVE FEVER’
Analysts at investment bank Saxo also warned investors on Friday about “aggressive speculative fever” in some technology and green stocks, recommending they start reducing exposure to so-called bubble stocks.
At 206 times 12-month forward earnings, Tesla is among the list of bubble stocks Saxo highlighted in its note to clients. That’s a far cry from Daimler’s 10 times forward earnings and Toyota’s 16 times.
The recent jump in cryptocurrencies also sparked debate among bankers.
Noting the violent inflationary price action boosting bitcoin in the past two months, BofA said the world’s popular cryptocurrency “blows the doors off prior bubbles”, such as the dotcom boom, China in the 2000s and gold in the 1970s.
Bitcoin hit $40,000 on Thursday, having doubled in price within a month, and has rallied more than 900% since a low in March. It topped $30,000 for the first time on Jan. 2, having breached $20,000 on Dec. 16.
JPMorgan has said bitcoin’s current highs are unsustainable, but it added that the digital currency could climb much higher in the long term.
Sourced Reuters
Reported by Thyagaraju Adinarayan
For more Finance and Investment news follow i-invest Online.
- Transforming football: IBM and Bayer Leverkusen use AI for superior game analysis
Bayer 04 Leverkusen and IBM are collaborating on a platform that combines efficiency, sporting excellence and modern technologies to strengthen the connection between players, coaches, clubs and internal IT IBM (NYSE: IBM) and German Bundesliga giants Bayer 04 Leverkusen are working together to create groundbreaking solutions that combine cutting-edge AI technologies, scalable cloud systems, and data-driven… Read more: Transforming football: IBM and Bayer Leverkusen use AI for superior game analysis - Freshwater use for material production has doubled in two decades
Researchers recommend that governments and industries track water use in material supply chains and invest in water-saving technologies – especially in water-stressed countries The amount of water used globally to produce industrial materials has doubled over the last 25 years causing environmental strain, according to new research by Vienna University of Economics and Business (WU).… Read more: Freshwater use for material production has doubled in two decades - FTSE Russell global survey: Asset owners concern about climate change risk grows
Research from FTSE Russell reveals 85% of asset owners identify climate change as a major concern, with sustainable investment becoming more central to fiduciary responsibility FTSE Russell, the global index provider, recently published the findings from its eighth annual asset owner survey, analysing how sustainable investment (SI) is perceived, considered and used by asset owners across… Read more: FTSE Russell global survey: Asset owners concern about climate change risk grows - Balancing three essential needs keeps employees motivated
Employees experience the greatest motivation and wellbeing when three key psychological needs are achieved in harmony, a new study has found New research led by Manchester Metropolitan University Business School has found that balancing three factors leads to people feeling more motivated and positive in their working lives. The study highlights how autonomy –… Read more: Balancing three essential needs keeps employees motivated - AI benefits capital owners more than workers
A recent study shows the benefits of AI are not evenly distributed, with workers, particularly those in high- and medium-skill occupations, experience declining income shares AI is reducing labour’s share of total income, new research from Vienna University of Economics and Business (WU Wien) has found. In a study of European regions, Klaus Prettner, Professor… Read more: AI benefits capital owners more than workers