The current equity bubble is 'not large yet' - Citi

investing.com:

Despite the recent solid equity performance so far this year, Citi analysts feel the current bubble is not yet overly large in terms of price appreciation, duration, valuation, or sentiment.

The firm made the comments in a research note to clients this week, noting that the current bubble is small relative to the past in terms of size of appreciation and duration.

As a result, the firm feels the market likely has further room to run and that FOMO «could create a bubble on par with the larger bubbles in the past, perhaps also given fears that it could be the last bubble before AI, rather than humans, is at the steering wheel.»

When it comes to Federal Reserve interest rate cuts, Citi said an inflating bubble does not mean that the Fed will not be able to cut, as they have not been averse to cutting even with strong equity markets.

The firm notes that typically, US rates and the USD move higher while the bubble builds. «The S&P does not always outperform, but we expect it to this time. Copper benefits, but AUD does not,» concluded the bank.