Stock bubbles present unique investment opportunities. Those are sentiments echoed by JPMorgan in a research note to investors. While bubbles are expensive markets that lack rational explanation, they can last up to 12 months, even years. Similarly, avoiding them could amount to lost investment opportunities.
The sentiments by the investment bank align with billionaire investor George Soros who is famous for saying, “when I see a bubble forming, I rush in to buy it.” The sentiments come when the US stock markets appear highly overvalued in an uncertain economic environment.
Large and small-cap stocks and commodities have skyrocketed to record highs arousing overvaluation concerns. Amid the spikes to record highs, investors have continued to ramp up investments buying stocks trading at record highs.
FED Easing Calls
The spike to record highs has mostly been fuelled by supportive policy measures spearheaded by the Federal Reserve. Dallas Federal Reserve Bank President Robert Kaplan is the latest to call for a reduction in central bank support.
According to the policymaker, there is too many imbalances in the financial markets. With the economy healing faster than expected, Kaplan believes it is best to start easing the monetary policy. The FED official maintains now is the time to start easing the $120 billion monthly bond program as well as revisiting the interest rate situation.
The sentiments come hot on the heels of the FED chair, Jerome Powell insisting it’s too early to even start talking about tapering. According to the chair, while the economy is growing fast, it is still way off the Fed’s goal for full employment and a 2% inflation target.
Passive Investing Push
Separately, Mike Green, a hedge fund veteran famous for managing Peter Thiel personal capita and setting up a macro hedge fund, has joined emerging ETF startup Simplify Asset Management. The move comes as a surprise as he has been a long critic of passive investing.
Simplify Asset Management is the latest ETF on the block that uses options to try and preserve investors exposure to the upside gains. Green joins the ETF to try and take advantage of the opportunities that have cropped up in recent years with explosive growth in passive investing.