Despite the historic economic contraction brought on the by the coronavirus pandemic, the stock market soared to new highs in 2020, lead in part by surging cryptocurrency and tech stocks.
However, some of the astronomical stock prices are likely in bubble territory, with Bitcoin and Tesla at the top of the list. According to a Deutsche Bank monthly investor survey comprised of responses from 627 market professionals, Bitcoin is viewed as the most unstable case, with more than half of respondents giving the digital currency a rating of 10 on a 1-10 bubble scale. The second largest bubble was attributed to US tech stocks, which were given an average rating of 7.9 out of 10, with 83% of respondents revealing a tech bubble rating greater than 7.
The Deutsche Bank survey also found that an increasing number of investors anticipate that both Bitcoin and Tesla are more likely to suffer a drop in price rather than an increase within the next year. When asked about the fate of Tesla, which soared by almost 750% last year, and about Bitcoin, which skyrocketed by nearly 300%, a large portion of the respondents revealed that the two stocks in question were “more likely to halve than double in value” over the next 12 months.
However, the poll’s respondents noted that they were unsure of what ultimately will cause the bubbles to collapse. The survey also found that monetary policies in support of the bubbles will likely remain for the foreseeable future, with 71% of respondents expecting the US Federal Reserve to abstain from tightening policies before the end of 2021. Similarly, 25% of the market professionals said an economic expansion could however, force their hand.
Information for this briefing was found via Deutsche Bank. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.