For a while I’ve been wondering about the stock market rises and where it will lead. Obviously one of the main reasons is QE and the chase for higher investment returns. The big worry has been whether QE is creating an asset bubble. I’m in the camp that it has.
As far as fundamentals go the UK has been flushed down the pan, Europe is in recession and following the UK in circling the drain, China isn’t growing as much as it was and the US is only showing tentative improvements on one side of its target to increase growth and employment.
So what fundamentals are supporting stock prices? What happens if growth doesn’t come as expected? If growth does pick up and QE comes off the table how far will the divide be between a QE inflated stock price versus the real value price?
Anyway I look at it I see a major correction coming. Don’t ask me when that will be and where we’ll be when it happens but at some point the differential between fantasy and reality must be closed.
Let me know your thoughts.