Is This Really A Bubble?
Why This Is Not A Bubble!
Although we remain focussed on a potential correction in risk assets through Q2 and Q3 2021, we must stress that this is not the result of a market bubble. Bursting bubbles are bad news. Rather a less-damaging pull-back is more likely to reflect faltering liquidity. In fact, underlying valuations look moderate in our view. We acknowledge that traditional P/E multiples do appear stretched. However, P/Es are a dangerously biased tool to use at the market level and inappropriate for macro-investing. We far prefer the P/L ratio. P/L’s are not stretched but we fear that the strongly rebounding real economy will soon pull liquidity (L) away from risk assets.
See our latest published research, Global View - Why This Is Not A Bubble! – February 2021
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