Despite much chatter, the market watchers at Capital Economics in London don’t think the flood of assets into government bonds over the last year shows signs of being a bubble. And the emerging markets meme, while perhaps too popular, doesn’t appear to be in danger of getting unsustainably inflated, they argue. The frothiest sector of the market looks to be commodities, writes Julian Jessop of Capital Economics. His thinking:Before you go, take a moment to listen to The Richer Scales (it's bubblelicious):
- If commodity prices are going to be sustained at these (often record) levels, final demand from consumers has to be consistently strong too.
- Even in the major emerging economies, growth is likely to be slower in the next few years than during the last commodity boom
- Even if final demand remains strong, huge stockpiling of commodities over the last year, notably industrial metals, could still undermine prices.