AMP chief economist Shane Oliver said it is increasingly difficult to pinpoint a bubble in the current cycle.
Speaking on InvestorDaily’s Relative Return Insider podcast, Oliver compared today’s markets with historical episodes, including Japanese shares in the 1980s, the Asian Financial Crisis of 1997–98, the dotcom bubble of the late 1990s, and the housing and credit crisis during the 2008 global financial crisis.
“Since then it’s become a little bit less clear what the bubble is,” he said.
Oliver highlighted the dominance of US energy stocks and the evolution of tech giants. FAANG – Facebook, Amazon, Apple, Netflix, and Google – looked “bubbly” over the last decade, he said, but never truly unwound.
That cohort has now morphed into the so-called “Magnificent Seven”, which continue to post strong earnings and growth.
“These stocks are producing spectacular earnings and growth, so that complicates it as [to] whether it’s really a bubble or not,” he said.
Valuations, Oliver said, remain elevated.
“The forward P/E on US shares is around 26 times and rising seemingly every day or every second day, and then in Australian shares it’s around 21 times,” the chief economist said.
“Valuation is a useful guide because it tells us how much fuel’s in the tank … But trying to use that and then say, ‘Well, it’s due for a pullback or a crash’, then [it] gets really hard.”
The market’s resilience is being bolstered by central banks returning to looser policy.
“The complication, of course, in the US is the Fed is moving towards or moving back into an easing cycle … That could be seen as a positive for sharemarkets and that’s what’s inspired markets recently,” Oliver said.
BlackRock’s most recent weekly commentary echoed this backdrop, noting that US stocks hit fresh highs last week, with the S&P 500 advancing 13 per cent for the year.
“The Federal Reserve’s restart of policy rate cuts supports our tactical upgrade to long-term US Treasuries and risk-on stance,” the wealth manager said. “Our core risk stance has leaned on US equities and the AI theme.”
While acknowledging that policy uncertainty and supply disruptions are weighing on near-term growth, raising the risk of a contraction, BlackRock remains certain “US equities will regain global leadership as the AI theme keeps providing near-term earnings support”.
Oliver too stressed that risks beyond valuations loom large, from US–China trade tensions and the potential for fresh tariffs to geopolitical flashpoints and rising concerns about public debt.
“There’s a whole bunch of things out there which could cause a correction in markets and markets are somewhat stretched in terms of valuation. So the risk is high,” he said. “But trying to say with confidence that’s going to happen is difficult.”
