* Bubble Breeders — Previous ageing bull markets have been associated with asset price bubbles. They are often based around a convincing idea (Secular Stagnation?), and fuelled by excess liquidity. They are big enough and last long
enough to destroy many contrarian investors.
* Bubble Assets — Right now, European fixed income valuations look most bubbly. DM equities look only mildly expensive. EM equities and commodities look least
bubbly.
* Bubble Equities — Within global equities, US/European Consumer and Health
Care stocks look most bubbly. Unfashionable EM commodity and Financial stocks
look least bubbly.
* Bubble Bursters — Rate hikes eventually burst bubbles, but it usually takes at least three to stop the juggernaut. We do not expect the third Fed hike until 3Q16. In the meantime, expensive stocks may keep getting more expensive.
* Bubble Pragmatists — It is still too early to fight this bull market. We remain Overweight the increasingly bubbly Health Care and Consumer Discretionary sectors. For balance, we are also Overweight the distinctly unbubbly Financials.