Biggest Bubble Ever? 2017 Recapped In 15 Bullet Points

Yesterday we presented readers with one of the most pessimistic, if not outright apocalyptic, 2018 year previews, courtesy of BofA's chief investment, Michael Hartnett who warned that in addition to the bursting of the bond bubble in the first half of the year, the stock market could see a 1987-like flash crash, potentially followed by a sharp spike in (violent) social conflict. However, in addition to his forecast, Hartnett also had one of the more informative, and descriptive, reviews of the year that was, or as he put it: 2017 was the perfect encapsulation of an 8-year QE-led bull market.

Here are his 15 bullet points that show why in 2017 we may have seen the biggest bubble ever (and why we can't wait to see what 2018 reveals).

  1. Da Vinci’s “Salvator Mundi” sold for staggering record $450mn
  2. Bitcoin soared 677% from $952 to $7890
  3. BoJ and ECB were bull catalysts, buying $2.0tn of financial assets
  4. Number of global interest rate cuts since Lehman hit: 702
  5. Global debt rose to a record $226tn, record 324% of global GDP
  6. US corporates issued record $1.75tn of bonds
  7. Yield of European HY bonds fell below yield of US Treasuries
  8. Argentina (8 debt defaults in past 200 years) issued 100-year bond
  9. Global stock market cap jumped1 $15.5tn to $85.6tn, record 113% of GDP
  10. S&P500 volatility sank to 50-year low; US Treasury volatility to 30-year low
  11. Market cap of FAANG+BAT grew $1.5tn, more than entire German market cap
  12. 7855 ETFs accounted for 70% of global daily equity volume
  13. The first AI/robot-managed ETF was launched (it’s underperforming)
  14. Big performance winners: ACWI, EM equities, China, Tech, European HY, euro
  15. Big performance losers: US$, Russia, Telecoms, UST 2-year, Turkish lira

As Hartnett summarizes, "2017 was a perfect encapsulation of an 8-year QE-led bull market"

  • Positioning was too bearish for either a bear market or a correction in risk assets.
  • Profits were higher than expected (global EPS jumped 13.4%) this time thanks to a synchronized global PMI recovery.
  • Policy was aggressively easy, as the ECB and BoJ bought a massive $2.0tn of financial assets; fiscal policy also easy (e.g., US federal deficit up $81bn to $666bn).
  • Returns were abnormally high in 2017 (Table 3); corporate bonds and equities soared, but the biggest surprise was stubbornly low government bond yields: thematic leadership of scarce “growth” (e.g. tech stocks), “yield” (e.g., HY, EM and peripheral EU bonds) and “volatility” once again remained the core of the bull.

Comments

Escrava Isaura mcbond Wed, 11/22/2017 - 04:55 Permalink

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Exactly, because Bitcoin is not related to the real economy. But, when the oil goes to $150 dollars a barrel, Bitcoin goes to zero and the economy crashes. Oil matters. Bitcoin doesn’t.   Article: Biggest Bubble Ever? 2017 Recapped Biggest Bubble Ever? 2018 Recapped Biggest Bubble Ever? 2023 Recapped   Biggest Bubble Ever? 2027/2032 Oops.  

In reply to by mcbond

S Spade . . . _ _ _ . . . Wed, 11/22/2017 - 07:56 Permalink

These markets aren't about supply, plenty of shares for anyone who wants to buy at current prices...it's phoney demand, fake markets created by institutions/funds bouncing a few shares back and forth to bump prices and force shorts to cover at their manufactured prices.  They're divorced from the supply demand intersection.  Soon as they stop playing games the markets they've corrupted drop like a rock..which is why they have to continue playing.

In reply to by . . . _ _ _ . . .

otschelnik Wed, 11/22/2017 - 04:43 Permalink

What's changed is the perception, now everybody thinks that if the train goes off the rails the Fed and gubermint will be there to bail us out. 

BigSimes Wed, 11/22/2017 - 06:00 Permalink

We all know it (the global economy etc) is poised, intentional or not, to tip over.We don't know, almost don't want to know, WHEN.But, here's two things to know:1. If the next crash is like the others, we'll just dust ourselves off and accept Monetary Confeti V.2 and party into the next bull market.2. If the next crash is a once in 80 or 100 year cycle, we're all f###ed, no matter how many bitcoins on a USB are shoved up your arse or ounces of gold buried under your rose bushes. 

Easyp Wed, 11/22/2017 - 06:47 Permalink

Janet Yellen, the outgoing chair of the Federal Reserve, affirmed to an audience at New York University on Tuesday night that she finds this year’s low US inflation a mystery — but also asserted that she had found it easy to explain the inflation of the previous three years of her tenure.Her comments on inflation, which came in a public conversation with Mervyn King, the former governor of the Bank of England, allowed her to explain her much-discussed comment in September that this year’s shortfall of inflation from its 2 per cent target was “more of a mystery”. Ms Yellen said she could not say that the Fed clearly understood the causes.