Markets do look bubbly – but not all of them
There are bits of the market that have been looking very toppy for a long time now. But that doesn’t mean all stockmarkets everywhere are in trouble.


Is there a bubble in the stockmarket? Depends how you judge a bubble. If you just look at valuations in, say, the US tech sector, or perhaps the global renewable energy sector, there is no shortage of bubble signals. Louis-Vincent Gave of Gavekal looks, for example, at the electric-car sector. Over the last few months, it has, he says, shown all the hallmarks of a bubble.
There have been allegations of fraud (Nikola Motor Company being the target here), hubristic chief executives (we are all looking at you, Elon Musk), listings of companies with “dubious business models” and “hair-raising valuations” based on the kind of growth projections that will be utterly impossible to deliver. It’s also now showing signs of bursting: poor Tesla has seen its shares fall by not far off 40% since the beginning of the year.
But just because there are bits of the market that have been looking (very) toppy for a good few months doesn’t mean all stockmarkets everywhere are in trouble. In this week's magazine, Michael Howell reminds us that money matters too – and that given the amount of it being conjured up and dumped directly into the bank accounts of the world’s consumers at the moment, we really need to look at markets as much through that lens as any other.
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When you do that, he says, you find out something I think MoneyWeek readers know already: in terms of the equity-to-liquidity ratio, the UK is one of the cheapest markets there is. Time to rotate into the old economy stocks we have so many of here if you haven’t already? We think so. We've more on this inthe magazine – and maybe listen to this week’s podcast too (see moneyweek.com/podcasts). Other markets to look at might be Vietnam and the global cannabis sector. Not so cheap, but just as interesting.
You need to protect your wealth too
Keeping an eye on this kind of thing matters. But there’s less point than there would be in putting effort into growing your wealth if you don’t also focus on protecting it. Last week’s Budget, which froze pretty much every tax allowance and threshold that makes a real difference, looks like it is going to make that a whole lot harder. It is, I’m afraid, time to spare a little time for your tax management. We look at the freezing of the pensions lifetime allowance (LTA). It’s complicated and boring – but it also has the potential to be very expensive, particularly for those of us with defined contribution pensions.
There are some ways to mitigate the pain of the allowance being frozen. You might also start thinking about inheritance tax (although given that it is your heirs, not you, who will effectively pay the tax, perhaps not so much?). Its main threshold hasn’t been changed since 2009 (it is now effectively the UK’s wealth tax) and the number of estates ending up paying it is rising fast. You can mitigate it a bit – but, again, you do have to engage with the problem first.
There is always the chance that the endless tax rises the chancellor has told us about won’t actually happen (Matthew Lynn is optimistic – see page 16). But given that inflation is very probably on the way, something that will nastily amplify how much you end up paying in real (after-inflation) terms if they do happen, you might as well be ready.
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Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).
After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times
Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.
Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.
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