World stock markets on BRINK: ‘Epic’ bubble about to BURST, experts warn

Thursday, April 5, 2018
By Paul Martin

WORLD stock markets could plummet this year because valuations are likely to hit disproportionate levels, taking them to “epic bubble levels”, experts have warned.

Thu, Apr 5, 2018

Experts have warned that disproportionate valuations could see stock markets plummet
Paul Gambles, Managing Director of MBMG Group, said following the 2008 financial crisis, global central banks pumped trillions of dollars into the economy to boost lending and encourage growth.

This has led to a significant increase in stock prices, taking global stock markets to the brink of bursting.

Mr Gambles said: “We had a policy response to the global financial crisis (and) at that point stocks were cheap and they had an enormous tailwind behind them in terms of fiscal support.

“This is quite a dangerous situation and it is creating a bubble, and that bubble has just got bigger and bigger and bigger

“There isn’t any doubt now (that) in valuation terms we’re in epic bubble proportions, probably the biggest bubble of all time.”

Speaking on US financial news channel CNBC’s ‘Squawk Box’ programme, the boss of the Thailand-based advisory firm added markets could be experiencing something similar to those from 2007 – just prior to the market crash – where conditions exist that are “prime for that bubble to be actually pricked”.

According to Mr Gambles, these include unsynchronised global growth, tighter monetary policy and “chaos” surrounding US politics with the administrations recent tougher position on trade with other nations.

But the strategist said there are a range of outcomes for markets that were “probably wider than it’s ever been at any time in history”, adding: “We could have a good stock market year. We could have a 20, 30, 40 percent plus correction.”

The S&P 500 – the US stock market index based on the market capitalisations of 500 large companies having common stock listed on the NYSE or NASDAQ – has shown that since the tough March 2008 period, the index has risen by around 287 percent.

In Europe, the benchmark Stoxx 600 has risen by 134 percent in the same 10-year period.

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