Are we nearing the end of an historic bull run in the US markets or will the party keep going (and for how much longer)? A stock market bubble, it seems, is on everyone’s minds.
Investors looking for answers can take their pick of experts vigorously supporting either side of the equation. And while it’s still anyone’s guess when a turnaround might come, Mike Newton of Scotia Wealth says it’s clear we’re not in a market bubble.
Next March will mark a full ten years of positive growth since the crash of 2008-09, a memorable run some are calling the longest bull market in history. Over that period the S&P 500 Index has gained over 330 per cent, hitting a new high on September 21 and showing a ten per cent rise since April.
Both the Dow Jones Industrial Average and the tech-heavy NASDAQ have also reached new highs over the past few weeks.
But the doomsday prophets aren’t hard to find. Last month, Goldman Sachs announced that its Bull/Bear Index which considers factors such as equity valuation, growth momentum, unemployment and inflation had risen to its highest point in 50 years.
Meanwhile, comparisons with the Crash of 1929 abound. This week, Nobel Prize-winning economist and Yale professor Robert Schiller described today’s risk-taking environment, which in the US is modelled in President Donald Trump and his approach to politics, is reminiscent of the Roaring 20s.
"At that time it seemed like it was a kind of gambling,” says Schiller. “The word gambling was used a lot to describe the market at that time so it became vulnerable. We're not exactly in that circumstance but we do have the market that has surged since 2009 so there is something of that spirit today.”
But while market sentiment may be high, the idea that we’re currently in bubble territory just isn’t borne out by the facts, says Newton, who sees progress coming at a measured pace.
“The everything bubble has been a popular term of late,” Newton told BNN Bloomberg recently. “Certainly, when I’m meeting prospective clients or when I have new additional capital coming in, there’s always the question of, ‘Aren’t we at the high?’”
“But I would point out that if you look at the S&P 500, 80 stocks are down 20 per cent or more. That’s a breadth signal that I find rather encouraging. I mean, there are things out there that you can look at [buying],” he says.
Some economists are predicting more gains ahead for US stocks, particularly over the medium term, as investors react positively to a new trade agreement being struck between Canada, the United States and Mexico.
“Countries around the world are down, Canada is flat — all I’m saying is that underpinning this is a pretty good, strong market, so stick with it,” says Newton.