Markets are starting to look like a bubble, according to a top Bank of America strategist.
In a new interview Joining Bloomberg, Michael Hartnett, the bank’s chief investment strategist, points to rising prices in crypto, the “Magnificent Seven” technology stocks and AI-related stocks.
‘I mean, there’s a huge euphoria. The euphoria is there because of the Fed. The Fed wants to cut rates no matter what, and the markets are leading in gold, crypto, stocks and even corporate bonds.
But a bubble is when too much money is chasing too few goods and everyone wants chips and there’s a lot of money chasing that, and yes, I think it has characteristics [of a bubble] in terms of price, the speed of movement, the valuation, the breadth. The bubbles are narrow, the bull markets are wide, and this is not very wide.”
The technology shares ‘Magnificent Seven’ Involving Microsoft, Amazon, Meta, Apple, Alphabet, Nvidia and Tesla.
Hartnett notes that the bubble “doesn’t necessarily have to burst now,” but he says US macroeconomic data look ominous, especially in the labor market.
“There is no doubt that the US labor market is cracked. At the same time, there is not a person in America who thinks inflation will go to 2%. Because it isn’t. It remains stuck between 3 and 4%.
So that backdrop of inflation being a little higher than expected and growth being a little weaker than expected is normally not good for risky investments, but when risky investments say, ‘We don’t care, we have AI and all that kind of stuff’ , which is very symptomatic of the kind of bubble mentality.
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