FTSE 100 rises, City guru warns of stock market bubble risk

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Despite concerns about ‘hysterical’ investor conduct, the Index rises close to pre-Covid levels

London shares closed at their highest level since late February as investors ignored the Covid 19 death toll record and warnings from a seasoned City guru that an epic bubble was about to burst on the scale of a Wall Street crash.

Globally, stock markets grew as hope that mass vaccination would provide a swift global economic recovery was reinforced by indications that both vacant Senate seats in Georgia had been won by Democrats.

As Joe Biden is set to be elected as U.S. president later this month, reports that Democrats will dominate both houses of Congress bolstered expectations for a larger-than-expected U.S. stimulus package.

After a nearly 3.5 percent gain that brought it to within 800 points of its pre-crisis stage, the FTSE 100 index closed 229.61 points higher at 6,841.86. The rally was helped by higher oil prices, which enhanced the appeal of energy company shares, and strong demand for banking stocks.

HSBC was up 10 percent by the close in London, Standard Chartered was up 9 percent and Barclays was up 8 percent .

Mining company shares were higher, with Glencore up 8% and Anglo American up 6%.

The decision by Saudi Arabia to slash crude oil production and a decline in U.S. crude inventories sent the price of a barrel of Brent crude oil to almost $55, the highest level since the fall of global financial markets late last February.

The Dow Jones Industrial Average rose more than 500 points to approach 31,000 in early trading on Wall Street. After rising nearly 50 points in early trading, the S&P 500 has reached a new peak.

In the technology-heavy Nasdaq, smaller gains were seen amid concerns that Biden would impose tighter Silicon Valley regulations.

“What investors are trying to figure out is how quickly Democrats would be able to introduce their tax agenda if they take control of the Senate, and would they be more likely to act on regulating big tech,”What investors are trying to figure out is how quickly Democrats would be able to introduce their tax agenda if they took control of the Senate and would be more likely to act on big tech regulations.

Despite indications that record US inflation rates are leading to a slowdown in the labor market and hints from ministers in the U.K., the bullish mood in stock markets came despite indications that record U.S. inflation rates are leading to a slowdown in the labor market. The freeze that was revealed this week could last until March at least.

Jeremy Grantham, the United Kingdom In a letter to customers, the co-founder of U.S. investment company GMO said that current investor conduct reflects sentiment in the run-up to the 1929 Wall Street crash.

“The long, long bull market since 2009 has finally matured into a full-fledged epic bubble,” the 82-year-old financial analyst said.

“With extreme overvaluation, explosive price increases, frenzied issuance and hysterically speculative investor behavior, I think this event will go down in history as one of the great bubbles in financial history, right alongside the South Sea Bubble, 1929 and 2000.”
According to Grantham, who is credited with projecting the height of the market in 2008, the market presents great risks to investors, adding that the Federal Reserve would not be able to escape an inevitable crash.

“These big bubbles are where fortunes are made and lost – and where investors really prove their mettle. Because positioning a portfolio to avoid the worst pain of a big bubble bursting is probably the hardest part,” he said.

It will work to suck investors into every job incentive in the industry and every error in individual human psychology.

But, no matter how hard the Fed tries to shore it up, the bubble will burst in due course, with the resulting negative effects on the economy and portfolios.
As an indication of the market bubble, Grantham cited shares of the electric car manufacturer. “As a Model 3 owner, my personal favorite Tesla tidbit is that its market cap, now over $600 billion, is more than $1.25 million per car sold per year, versus $9,000 per car at General Motors. What does 1929 have to match that?”

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