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What do you think of Market Bubbles? Can you identify any Market Bubbles that are present in this market?

Economics Dec 19, 2020

What do you think of Market Bubbles? Can you identify any Market Bubbles that are present in this market?

Expert Solution

In today's market, there are a number of red flags indicating the possibility of a market bubble. The first is the consistent increase by the Federal Reserve in interest rates. By increasing interest rates, the Federal Reserve is attempting to slow down inflation, which is increasing prices. A second indicator is the uncontrolled increases in the stock market. The stock market has historically been cyclical, based on political and economic viewpoints. In 2018, the stock market is a Bull market with strong investor confidence. If inflation is not controlled and more emotional investing occurs, a slight change in political or external factors, such as a 'trade war', could burst this bubble.

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