We now live in a world of rolling bubbles – analyst

[Bubble]
Petrovich9

The top 10 stocks in the U.S. now represent approximately 45% of total market capitalization, a level of concentration that has broken traditional market trend lines and left investors struggling to determine whether this represents a new normal or a bubble poised to burst.

Viktor Shvets, global head of strategy at Macquarie Group, argues that the answer is neither—instead, he says, “We now live in a world of rolling bubbles.”

In an interview with CNBC, Shvets explained that this extreme concentration is visible across all global equity markets, not just the U.S.

“If you take out five, six stocks in every single market, whether it's the U.S. (SP500 [https://seekingalpha.com/symbol/SP500]), (COMP:IND [https://seekingalpha.com/symbol/COMP:IND]), (DJI [https://seekingalpha.com/symbol/DJI]), whether it’s Korea (EWY [https://seekingalpha.com/symbol/EWY]), Asia Pacific (GMF [https://seekingalpha.com/symbol/GMF]), whatever you look at, the rest of the market is not really performing,” he said.

When asked whether traditional investment principles championed by Warren Buffett still apply, Shvets was direct: “We do not live in Warren Buffett’s world.”

The strategist identified two fundamental shifts that distinguish today’s markets from any period in the past two centuries.

First, he pointed to the unprecedented creation of capital over the past two decades, noting that “for the first time in human history, we live in a world of abundant capital, not constrained capital.”

This abundance, he argued, makes traditional valuation methods obsolete because “anything that is abundant cannot be priced.”

Second, he emphasized that the information age is fundamentally different from previous technological revolutions because artificial intelligence encompasses everything from software (IGV [https://seekingalpha.com/symbol/IGV]), (XSW [https://seekingalpha.com/symbol/XSW]), (IGPT [https://seekingalpha.com/symbol/IGPT]) and chips (SMH [https://seekingalpha.com/symbol/SMH]), (SOXX [https://seekingalpha.com/symbol/SOXX]), (SOXL [https://seekingalpha.com/symbol/SOXL]) to robotics (BOTZ [https://seekingalpha.com/symbol/BOTZ]), (ARKQ [https://seekingalpha.com/symbol/ARKQ]), (ROBO [https://seekingalpha.com/symbol/ROBO]) and biotech (IBB [https://seekingalpha.com/symbol/IBB]), (XBI [https://seekingalpha.com/symbol/XBI]), (FBT [https://seekingalpha.com/symbol/FBT]).

This all-encompassing nature of technology makes identifying a single bubble nearly impossible.

“We had a software bubble. It’s rolled back. We have chips bubble. It will be rolling back. And then we’ll have applications,” Shvets explained.

In this environment, he warned that the concentration of returns will remain high because “all the winnings will continue to go to the winners. Losers will get nothing.”

Shvets also dismissed traditional geographic investment distinctions, arguing that the line between emerging and developed markets has essentially vanished.

“U.S. is not special. Europe is not special. Asia is not special,” he said, adding that “we’re all behaving like emerging markets.”

Without the strong global trade and cyclicality that historically drove emerging market performance, investors must now focus on sectors rather than regions.

For navigating this environment, Shvets recommended thematic investing—identifying trends likely to perform over the next several years while remaining ready to pivot as one theme sunsets and another emerges.

He identified robotics, automation, quantum computing, and biotech as the next major bubbles waiting to form. “All of that is yet to come, as a major bubble,” he concluded.

U.S. markets tracking ETFs: (DIA [https://seekingalpha.com/symbol/DIA]), (DDM [https://seekingalpha.com/symbol/DDM]), (DOG [https://seekingalpha.com/symbol/DOG]), (DXD [https://seekingalpha.com/symbol/DXD]), (SDOW [https://seekingalpha.com/symbol/SDOW]), (SPY [https://seekingalpha.com/symbol/SPY]), (VOO [https://seekingalpha.com/symbol/VOO]), (IVV [https://seekingalpha.com/symbol/IVV]), (RSP [https://seekingalpha.com/symbol/RSP]), (SSO [https://seekingalpha.com/symbol/SSO]), (UPRO [https://seekingalpha.com/symbol/UPRO]), (SH [https://seekingalpha.com/symbol/SH]), (SDS [https://seekingalpha.com/symbol/SDS]), (SPXU [https://seekingalpha.com/symbol/SPXU]), (QQQ [https://seekingalpha.com/symbol/QQQ]), (QQQM [https://seekingalpha.com/symbol/QQQM]), (TQQQ [https://seekingalpha.com/symbol/TQQQ]), (QID [https://seekingalpha.com/symbol/QID]), and (SQQQ [https://seekingalpha.com/symbol/SQQQ]).

Tech ETFs: (VGT [https://seekingalpha.com/symbol/VGT]), (XLK [https://seekingalpha.com/symbol/XLK]), (IYW [https://seekingalpha.com/symbol/IYW]), (FTEC [https://seekingalpha.com/symbol/FTEC]), (IXN [https://seekingalpha.com/symbol/IXN]), and (RSPT [https://seekingalpha.com/symbol/RSPT]).

Artificial Intelligence/Robotics ETFs: (AIQ [https://seekingalpha.com/symbol/AIQ]), (BOTZ [https://seekingalpha.com/symbol/BOTZ]), (DTEC [https://seekingalpha.com/symbol/DTEC]), (WTAI [https://seekingalpha.com/symbol/WTAI]), (XAIX [https://seekingalpha.com/symbol/XAIX]), (WISE [https://seekingalpha.com/symbol/WISE]), (GINN [https://seekingalpha.com/symbol/GINN]), (ROBT [https://seekingalpha.com/symbol/ROBT]), (TECB [https://seekingalpha.com/symbol/TECB]), (XT [https://seekingalpha.com/symbol/XT]), (THNQ [https://seekingalpha.com/symbol/THNQ]), and (CHAT [https://seekingalpha.com/symbol/CHAT]).

Biotech ETFs: (IBB [https://seekingalpha.com/symbol/IBB]), (XBI [https://seekingalpha.com/symbol/XBI]), (FBT [https://seekingalpha.com/symbol/FBT]), (BBH [https://seekingalpha.com/symbol/BBH]), (PBE [https://seekingalpha.com/symbol/PBE]), (IDNA [https://seekingalpha.com/symbol/IDNA]), (GNOM [https://seekingalpha.com/symbol/GNOM]), (BIB [https://seekingalpha.com/symbol/BIB]), and (HELX [https://seekingalpha.com/symbol/HELX]).

Cloud Computing ETFs: (SKYY [https://seekingalpha.com/symbol/SKYY]), (WCLD [https://seekingalpha.com/symbol/WCLD]), (CLOU [https://seekingalpha.com/symbol/CLOU]), (FCLD [https://seekingalpha.com/symbol/FCLD]), (SKYU [https://seekingalpha.com/symbol/SKYU]), and (CLOD [https://seekingalpha.com/symbol/CLOD]).

Software ETFs: (IGV [https://seekingalpha.com/symbol/IGV]), (XSW [https://seekingalpha.com/symbol/XSW]), (IGPT [https://seekingalpha.com/symbol/IGPT]), (AOTS [https://seekingalpha.com/symbol/AOTS])

Semiconductor ETFs: (SMH [https://seekingalpha.com/symbol/SMH]), (SOXX [https://seekingalpha.com/symbol/SOXX]), (SOXL [https://seekingalpha.com/symbol/SOXL]), (FTXL [https://seekingalpha.com/symbol/FTXL]), (XSD [https://seekingalpha.com/symbol/XSD]), (USD [https://seekingalpha.com/symbol/USD]), (PSI [https://seekingalpha.com/symbol/PSI]), and (SEMI [https://seekingalpha.com/symbol/SEMI]).

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