FX.co ★ Standard Chartered CEO sees no reason to panic over speculative hype

There has been a lot of controversial news about the stock market. Therefore, many economists voiced concerns about the stock indexes that reached unsustainable levels amid a period of speculative hype. However, Standard Chartered CEO Bill Winters assured US citizens that things are not so grim as they may seem.

"There are indications that the broader stock market is frothy, whether it’s the various valuation multiples (that) would indicate that the markets are, certainly (in) some aspects, are toppish", he said. Yet, some investors are worried that such a rapid rally may eventually lead to the collapse of many price bubbles causing a wave of bankruptcies.

The stock market is currently soaring. US stock indexes have hit record levels, especially the Dow Jones. At the same time, Winters thinks that the rally in the equity market looks uneven as the shares of companies from some sectors, primarily banking, are undervalued. "That does not apply to banks, I will add very quickly. I would say value stocks generally don’t look like they are very fully valued right now. But that’s the nature of the speculative hype that we are in right now," he added. Thus, investors are worried not only about the price bubbles but also about the inflation growth amid the adoption of a new relief plan. The Federal Reserve System also deployed its instruments to adjust its monetary policy, namely extremely low rates.

However, Winters is not concerned about inflation in the short term. He is sure that the combination of ongoing "very accommodative" monetary policy and "very substantial" fiscal impetus could lead to a temporary rise in inflation. “But for that to translate into real market volatility would probably require some other exogenous shock,” he pointed out.