Deutsche Sees Trouble Ahead for the World’s ‘Frothy’ Stock Markets
- Central bank turnaround may hit asset prices, says Matsuoka
- Buffers to large-scale, prolonged correction likely to weaken
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There could be trouble ahead for developed world equity markets with "frothy" valuations as central banks start shifting policy, according to Deutsche Bank AG.
Price-to-earnings ratios increased steadily after the global financial crisis as waves of monetary stimulus pulled down the yields on safe assets, spurring investors into riskier options. That dynamic may be on the verge of reversing with a turnaround in policy now underway in developed nations other than Japan, Mikihiro Matsuoka, chief economist of the Japanese unit of Deutsche Bank AG, wrote in a note dated July 10.