Crosscurrents bound to create bouts of volatility but also generate
investment opportunities across markets
BOSTON, June 23, 2014 /CNW/ - Investors should not see today's broad
stock market as a bubble but rather as a mature bull market, says David
L. Donabedian, CFA, U.S. Chief Investment Officer at CIBC (TSX: CM) (NYSE: CM).
"By virtue of its duration and current valuations, equities are in the
mature phase of a bull market. That means a more sober pace of advance,
with a lot riding on the economy and monetary policy," says Mr.
"We are not in another bubble. But given the destruction over the last
15 years from the bursting of the tech, credit and housing bubbles,
this question is always a wise one to ask."
Stoked by unconventional monetary stimulus and with evident pockets of
valuation excess, the S&P 500 reached progressive new highs. But,
overall market valuations are middling relative to the long-term
average, and interest rates remain well below average.
"Excessive valuations and 'hot' IPOs in the social media and biotech
spaces have been deflated, while the overall market advanced. This is
an indication of rational, valuation-sensitive behavior—not a bubble,"
The good news is the U.S. economy continues to gain strength. "It has
been a long time coming, but the US economy is showing its broadest
base of health in almost a decade," says Mr. Donabedian. "We look for 3
per cent or better real GDP growth over the next few quarters—about a
full percentage point higher than the average growth rate of this
There is no question that the extraordinary measures of the U.S. Federal
Reserve and other central banks have been a huge catalyst for the
equity bull market in recent years, he says.
The European Central Bank may be late to the party but now that it is
taking a more aggressive approach, equity markets around the world, not
just in Europe, will continue to find support.
"Liquidity is increasingly a global phenomenon," he adds. "Over time,
though, we expect that central bank policy will be the most frequent
source of market volatility."
CIBC is a leading Canadian-based global financial institution with
nearly 11 million personal banking and business clients. Through our
three major business units - Retail and Business Banking, Wealth
Management and Wholesale Banking - CIBC offers a full range of products
and services through its comprehensive electronic banking network,
branches and offices across Canada with offices in the United States
and around the world. You can find other news releases and information
about CIBC in our Media Centre on our corporate website at www.cibc.com.
For further information:
Kevin Dove, Head, External Communications, 416-980-8835 or email@example.com