ARE WE AT THE END OF THE BUBBLE

This is a daily question which we are considering. No one wants to get at the wrong side of the markets. Some numbers from the US markets would probably throw light on the answer.  

In the above table, if we see the 2019, 2020 and 2021 column, highest growth is recorded by Nasdaq 100, which is overweight new generation companies. We can see a 48% growth in 2020 and 15% in 2021 so far. In perspective, we can see 30% + growth years in 2013 and 2017. The growth is impressive, but does not seem to be un-calliberated / bubble like growth.  

Similarly, recent growth experienced in US REIT’s and US Large Caps have been previously experienced in 2013/2014. Broadly, 2013 & 2014 growth can be totued as equally impressive since it has happened over a bigger base – 2012 which had been a 15-18% overall growth year compared to a base of negative growth year, 2018. This also does not indicate excesses / mad growth.  

At the bottom of the table (last 5 columns), we are able to see the growth figures of defensive assets like Bonds, Treasuries and Gold. The growth in the defensive assets is clearly not matching the growth in equity & related asset classes, in fact, going negative in the current year, thus showing that the smart money is as of now more interested in playing front foot.  

These figures surely do not reflect the massive dollars invested in private equity, which further skew the case in favor of equity markets and the fact that the culmination/bursting of the bubble will be at a distance.  

By having a close watch on these figures, one could possibly contemplate the ‘top of the mountain’ in future. For now, it seems that we have some distance to climb.