JPMorgan Downplays Stock Market Bubble Concerns But Calls For Caution

There is no bubble to be found in the broader stock market. Those are sentiments echoed by analysts at JPMorgan at a time of growing fear among investors. Stocks have continued to power to record highs fuelling concerns over valuations that appear overstretched. Rising inflation has all but continued to exacerbate the situation fuelling bubble burst concerns.

But according to a research note by the investment bank, the stock rally to record highs is well supported by improving fundamentals. High expectations for historic US economic growth support the move higher on stocks, according to the firm.

However, JPMorgan has also warned that lethargy may be kicking in in certain sectors, and a potential correction could come into play. Sectors that have more than tripled in price over a short period should be a point of concern to value investors.

Potential Bubbles

Clean Energy is one of the sectors that investors should be wary of as investors continue to shift focus towards sustainable investing. Clean Energy ETF has already rallied by more than 300% in less than one year, conversely fitting the bubble criteria.

Solar Energy and Electric Vehicles are others sectors that have experienced a significant boom over a short period. The sectors have been on a roll on investors betting on President Joe Biden’s increased focus on technologies that combat climate change.

The cryptocurrency sector has also experienced triple-digit gains over the past year, all but arousing the bubble concerns. Bitcoin, for instance, remains the center of attention, having gained more than 1400% over the past year.

While JPMorgan believes cryptocurrencies present one of the biggest bubbles, the firm still thinks the crypto could hit record highs of $130,000. The ambitious price target stems from increased trading activities and investments that have seen even institutional investors get involved.

Amid the stock market bubble concerns, major indices are still rallying, with some already flirting with record highs. The index could race higher as some stocks led by Square, Floor & Décor and JPMorgan Chase, are trading near buy zones.

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