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Bubble in Tech Stocks Will Cause “Clean Out” in Markets

February 25, 2021 By Jeremy Jones, CFA

By eamesBot @ Shutterstock.com

Jamie Smyth and Robin Wigglesworth report on Peter Costello’s view that the bubble in tech stocks being inflated by the world’s central banks could cause a market “clean out.” They write in the Financial Times:

The world’s big central banks are inflating a bubble in technology stocks that will lead to a “clean-out” on global equity markets, the chairman of Australia’s $135bn sovereign wealth fund has warned.

Rock-bottom interest rates and bond-buying programmes put in place to cushion the impact of the pandemic last year have left economies and markets vulnerable to a shock, Peter Costello said in an interview.

His comments come as investors around the world have started to worry how long central banks will hold down interest rates in the event of rising inflation as the global economy recovers from coronavirus. These nerves have weighed on equity markets and hit government bond prices, pushing up yields from the US to Australia.

“What worries me is having expended all of their firepower, there is not much left for the next crisis, and there will be another crisis,” said Costello, a former Australian treasurer who heads the Future Fund, the country’s 15-year-old A$171bn (US$135bn) sovereign wealth fund. Cheap money has also fuelled a boom in Australian property prices, he added.

Read more here.

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Jeremy Jones, CFA
Jeremy Jones, CFA, CFP® is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. Richard C. Young & Co., Ltd. was ranked #5 in CNBC's 2021 Financial Advisor Top 100. Jeremy is also a contributing editor of youngresearch.com.
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