Rising Long-Term Interest Rates may Burst the US Stock bubble
U.S. stocks hit record highs one after another. Wall Street veterans warn: rising long-term interest rates may burst the stock market bubble
Wall Street veteran Richard Bernstein believes that if long-term interest rates rise further,” the bubble” he currently sees in the stock market may burst-he said this may be the biggest bubble in his career.
In an interview with CNBC, Bernstein believes that due to the Federal Reserve‘s (Fed) policy, long-term interest rates are at a low level and investors have bought long-term assets, leading to a bubble in the stock market.
He said that long-term assets may include the far end of the U.S. Treasury yield curve, Bitcoin, technology stocks and even meme stocks.
“Anyone who holds these long-term assets firmly believes that long-term interest rates will not rise, because this (increasing interest rates) is the bane of the bubble.” Bernstein said that the current low interest rates are just the result of deliberate distortions by the Fed.
“I personally think that I may be in the biggest bubble of my career now,” he added.
As the U.S. economy recovers from the impact of the COVID-19 pandemic, the stock market has continued to rise for more than a year, and has reached record highs one after another. This has triggered extensive discussions about bubbles, and many investment experts have been urging people to be cautious about the possibility of the bubble bursting.
Billionaire Jeremy Grantham’s investment company GMO said last month that the current environment is a global growth bubble, while Robert Kiyosaki, author of “Rich Dad Poor Dad”, told investors to prepare for market collapse, even retail investors think so. , 40% of retail investors believe that there is a bubble in the market, but they do not believe that the market will really collapse.
Bernstein urged retail investors to diversify their investment from these highly frothy assets, while the market is still in a bubble, investment seems simple.
“For the same reason, we put a spare tire in the trunk, and we have fire extinguishers at home. That’s why you have to diversify your investment. When you get into a bubble, diversified investment becomes more important because we We know that the bubble will burst, but we don’t know when it will burst,” Grantham said.