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Investment bubbles are a regularly occurring feature of the financial markets. The specific set of conditions that have historically characterized the start of an investment bubble appear to be forming. While notoriously hard to pinpoint in real time, a theme with the potential to become the next bubble is “green” infrastructure. The green infrastructure theme spans many sectors and markets around the world, Jeffrey Kleintop, Senior Vice President and Chief Global Investment Strategist at Charles Schwab, briefs.

The conditions appear ripe again for the start of the next investment bubble

“Alternative energy and other green stocks could benefit from proposed US, European and Chinese climate and green energy legislation and spending including electric vehicles, renewable power generation, eco-friendly infrastructure, and home energy efficiency. The scope of the initiatives is bold and includes wide-ranging goals.”

“Green stocks now appear to have given up last year’s gains and the recovery and stimulus driven gains in oil prices and interest rates appears to be moderating. This could mean it may be time for ‘green’ stocks to begin to inflate again as progress is made on the Biden infrastructure plan and Europe gets closer to deploying its green funding initiatives.”

“Often past bubbles have been concentrated in just one sector and country (ex, US tech stocks). In contrast, a green stock bubble will span many sectors and markets around the world.”

 

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