Beware of Bubbles & Market Valuations in QE Sloshfest
There have been several reports of money managers returning funds to investors because of a lack of attractively valued investment opportunities in the markets. This is actually very responsible and quite prudent from a fiduciary standpoint where most fund managers are so concerned about raising assets under management that they sacrifice the fund`s long term viability by investing at inopportune times, i.e., investing in assets at historically rich prices relative to the underlying fundamentals of the business.
QE has definitely distorted many asset prices to the upside, and with it finally ending this summer, fund managers are weary of buying at these levels without a guaranteed catalyst to replace the Fed`s monthly liquidity injections, and the global economy will really need to be humming along to replace $85 Billion of Fed injections via asset purchases.
Thus, the takeaway is that many assets are overvalued when it comes to stock prices but we will focus on 5 candidates that we think are going to have a tougher time justifying their lofty stock prices due to a myriad of factors other than the taking away of the QE punchbowl.