Fund managers and economists say the Reserve Bank’s decision to add billions of dollars in more record low-cost borrowing for years out will set off a raging bull market this year with more GameStop-style events and stoke asset prices – from housing to aggressive mergers and acquisitions.
RBA governor Philip Lowe, who faces a grilling at a parliamentary committee hearing on Friday morning, said this week he had no concerns of bubbles forming in housing or stocks despite pinning the official cash rate to 0.1 per cent for up to four years and spending another $100 billion on bonds to drive down borrowing costs.
Wilson Asset Management’s lead portfolio manager Matthew Haupt said the timing of the RBA’s extension to quantitative easing (QE) was wrong.
“Doing it now raises the risk of asset price bubbles across all assets. I think it means things are going to get a bit hot. You will get a few more events like GameStop,” he said.
But Atlas Funds Management’s Hugh Dive said while there were signs of asset bubbles in tech stocks or the buy now, pay later sector, it was not widespread across the ASX. And Australian Super chief investment officer Mark Delaney supported the RBA and said high equity prices reflected stronger earnings this year.
Read more in the Australian Financial Review.