Analyzing Historical Asset Bubbles and Current Market Trends

  • Bank of America analysts studied nine major bubbles in the last 100 years
  • Volatility increased during the development of these bubbles
  • VIX is currently at a low reading of 12.95
  • The situation resembles 1995 more than 1999
  • Nasdaq 100 stocks show unusual behavior in rallies and sell-offs
  • Fragility events are at their highest frequency from tech stocks in the past 30 years
  • AI’s impact on the global economy is uncertain like railroads in the 1840s Britain
  • Price momentum, investor belief in buying dips, and meme stock popularity contribute to potential irrationality

Bank of America analysts have examined nine significant asset bubbles from the past 100 years, including the Dow DJIA before the Great Depression and the ARKK fund in 2021. They found that volatility consistently increased during these bubbles’ development. The current CBOE Volatility Index (VIX) is at a low reading of 12.95, which suggests similarities to 1995 rather than 1999. Nasdaq 100 stocks exhibit unusual behavior in rallies and sell-offs. Fragility events, dividing a stock’s one-day return by its 21-day trailing volatility, are at their highest frequency from tech stocks over the past 30 years, particularly for megacap tech companies like Nvidia, Alphabet, and Meta Platforms. The uncertainty surrounding AI’s impact on the global economy mirrors the internet in the ’90s and railroads in 1840s Britain. Price momentum, investor belief in buying dips, and meme stocks contribute to potential irrationality in the market.

Source: https://www.marketwatch.com/story/heres-what-happened-in-9-major-bubbles-in-the-last-100-years-and-whats-going-on-now-7f759943?mod=newsviewer_click
Factuality Level: 8
Factuality Justification: The article provides accurate and objective information about the analysis conducted by Bank of America analysts regarding asset bubbles and volatility. It discusses historical trends and compares current market conditions to previous bubbles. While it includes some speculation about the potential impact of AI on the global economy and mentions a specific stock (GameStop), it does not contain any misleading or irrelevant information, sensationalism, redundancy, or personal perspective presented as fact.
Noise Level: 6
Noise Justification: The article provides some relevant information about asset bubbles and volatility but also includes speculative elements like mentioning an individual investor’s actions (Keith Gill) and using terms like ‘Roaring Kitty,’ which may not be necessary for a comprehensive analysis. It also briefly touches on historical events without diving into the details or providing actionable insights.
Public Companies: Bank of America (BAC), Nasdaq 100 (NDX), Nvidia (NVDA), Alphabet (GOOGL), Meta Platforms (META), GameStop (GME)
Key People: Benjamin Bowler (derivatives analyst at Bank of America), Keith Gill (investor associated with GameStop rally)

Track all markets on TradingView

Financial Relevance: Yes
Financial Markets Impacted: Stocks, VIX (Volatility Index)
Financial Rating Justification: The article discusses asset bubbles, volatility in financial markets, and specific stocks such as Nasdaq 100, Nvidia, Alphabet, Meta Platforms, and GameStop. It also mentions the CBOE Volatility Index (VIX) and investor behavior.
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Extreme Rating Justification: There is no mention of an extreme event in the article.

Reported publicly: www.marketwatch.com