Dario, founder of the world’s largest hedge fund Jinqiao water, warned in an interview recently that the scale of the US stock bubble has reached half the level of the historical market crash triggered by the 2000 Internet bubble and the Great Depression of 1929.
He warned that some of the best performing stocks benefited from price focused speculative trading, attributing the recent market volatility to the shift of investors to “meat and potatoes” stocks, which did not benefit from the epidemic trading as some technology companies did.
He explained that the important factor supporting the current valuation of stocks is high liquidity and low interest rate environment, and investors’ behavior is also one of the reasons for the formation of the US stock bubble. The tendency of investors to value past performance is leading to excessive expansion of the market, especially in the field of technology stocks, which are close to half of some historical bubbles in the past. Investors should be cautious about the low returns of US stocks in the future.
Dario also said that the arrival of many new things brought about changes, but investors tended to make inferences based on the past but did not pay much attention to prices. When this happened, a certain degree of bubbles began to emerge.
According to our yardstick, the bubble has not reached the level of 2000 and 1929, but it seems to be on the way now. ” Therefore, from the perspective of value, it can be predicted that the return of the stock market will shrink relative to other assets.
When asked what factors might lead to the eventual breakdown of the bubble, Mr Da Leo said that the Fed’s policy is the biggest driver of concern, and that as the low interest rate environment continues, Fed officials are facing difficulties. On the one hand, interest rates can be raised, which may lead to a sharp drop in the stock market and hinder economic growth; on the other hand, the authorities can maintain low interest rates by purchasing government bonds, which will lead to further inflation.