The stock market is not in a bubble for these 2 reasons, DataTrek says
stock marketis not yet in a bubble, DataTrek co-founder Nicholas Colas said in a note on Wednesday.
- Two conditions that define stock market bubbles are fast rising valuations and retail investor fervor, according to the note.
- "We don't have the first, and the second is just starting," Colas said.
- Sign up here for our daily newsletter, 10 Things Before the Opening Bell.
The stock market is not yet in a bubble, but a "baby bubble" might be forming, DataTrek co-founder Nicholas Colas said in a note on Wednesday.In order for a bubble to even form in the stock market, two conditions are necessary: fast rising valuations and retail investor fervor, according to the note.
View all Offers
- 4% OFF
Dettol Original Germ Protection Bathing Soap bar, 125 gm, Buy 4 Get 1 Free₹ 220₹ 229Buy On
Dettol Original Germ Protection Liquid Handwash Refill, 1500ml (Price Off)₹ 208Buy On
Mamaearth Onion Hair Fall Shampoo for Hair Growth & Hair Fall Control, with Onion Oil & Plant Keratin 250ml₹ 349Buy On
- 30% OFF
Pampers All round Protection Pants, Large size baby diapers (LG) 64 Count, Anti Rash diapers, Lotion with Aloe Vera₹ 801₹ 1149Buy On
Mamaearth Onion Oil for Hair Growth & Hair Fall Control with Redensyl 150ml₹ 399Buy On
So far, the current reading of the Shiller PE ratio does not indicate that a bubble is forming in
"To our eyes the current-day red dot above lacks the antecedent spike of either 1929 or 2000, so by this measure we can't call the current US equity market in a bubble," Colas said.While the stock market is not in a bubble yet, it is possible that one could be forming, according to DataTrek. Heightened Google search trends for terms like "buy stocks," "
Retail investors have piled into the stock market since the COVID-19 pandemic, with $0 commission trading apps like Robinhood making it easier than ever to begin buying and selling stocks. The heightened retail activity was apparent last month after a Reddit forum helped spark a gravity-defying short-squeeze in shares of GameStop.
But while more retail investors are participating in the stock market, that doesn't mean it's time to sell stocks, the note said."We have not yet had the sort of valuation run up that says it's time to sell," Colas said, adding that investors should remain invested in US large cap and emerging market stocks.
And while trying to call the top of a bubble remains appealing for investment professionals, it's ill-advised.
"Even if you're more bearish than us, remember that the end of the world only happens once so timing is everything for that trade. And early is the same as wrong," Colas concluded.Read more: Credit Suisse says to buy these 16 'highest-conviction' stock picks that are set to outperform despite the market's contrarian view
- Weekend watch list for OTT — Fahadh Faasil’s Malik to Farhan Akhtar’s Toofan and more
- Reliance Retail surprises all by more than doubling its net profit in the last three months
- Reliance Jio adds 42 million subscribers but the average revenue is pretty much the same
- YES Bank’s net profit grows four fold as provision for bad loans shrink
- Amazon Prime Day 2021: Best deals and offers on headphones