Bull market still has legs, but it is starting to show signs of fatigue
The bull market for growth assets such as equities and high-yield corporate bonds is maturing, with increasingly stretched valuations. While valuations alone rarely cause markets to reverse, they imply lower returns in the longer term. Bull markets typically end just before an economic downturn and after a prolonged period of tighter liquidity conditions, neither of which is evident yet. The risk of recession appears low, monetary conditions are loose and growth momentum is strong. Market price behaviour is still risk seeking. Flows from passive investments could even cause a final melt-up in stock prices as investor scepticism potentially gives way to late cycle euphoria. However, the fundamental backdrop is weakening slowly. Global economic growth has used up much of the spare capacity available for above-trend growth. At the same time, monetary policy looks likely to become steadily less supportive. The cost of being a little early in getting out of the market is similar historic...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.