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.”
