Speaking to InvestorDaily, Mr Middleton – who heads financial planning and portfolio construction firm Middletons Securities – said it is entirely feasible that the price of shares could be bid up as a result of investors chasing yields.
“You are only getting three per cent or something on a term deposit but you can get six per cent by owning bank shares,” Mr Middleton said.
“We could well see a bubble in share prices in a similar way to the manner we saw a bubble in the US in real estate prices that led to the [global financial crisis],” he said.
“The problem with that is at some point the low interest rate environment starts to diminish and we start to see interest rates go up, and especially … if we have a bout of inflation come through.”
However, Mr Middleton is confident that the Australian economy is stable and shares are safe at the moment in terms of P/E.
“But if we start to see money pouring into the market in pursuit of yields, then we would start to see potential problems a little bit further along the track.”
