Investing.com — Barclays analysts have cautioned that indicators of a market bubble are showing within the wake of the U.S. presidential election, pushed by retail investor exuberance and elevated speculative exercise.
In response to Barclays (LON:), the post-election crypto surge has prolonged to different components of the fairness market.
The agency highlighted that “euphoria in the crypto market has spilled over to other sectors of the equity markets that are generally perceived to be darlings of the retail investors community.”
This pattern is alleged to incorporate retail favorites akin to Nvidia (NASDAQ:), Tesla (NASDAQ:), and MicroStrategy (MSTR), which have seen elevated use of leveraged exchange-traded merchandise (ETPs), amplifying rebalancing flows over the previous month.
Barclays additionally flagged a surge in choices buying and selling. “Option volume on US stocks recently increased by 50% to $459 billion in the first week post-elections,” famous the analysts.
Whereas this quantity has since moderated, they notice it stays 20% above election-day ranges.
Moreover, the financial institution pointed to inverted skew in choices pricing on “unprofitable” shares as a possible signal of froth. Inverted skew indicators robust demand for upside publicity—a trademark of speculative bullishness, in accordance with Barclays.
The analysts underscored the chance of this speculative fervor spilling over to broader markets, significantly towards the backdrop of geopolitical dangers, akin to escalating tensions within the Russia-Ukraine battle.
Barclays says these fascinated with hedging methods ought to assess name spreads and European fairness put choices tied to rising oil costs, as potential safeguards.
Whereas market exuberance usually accompanies election cycles, Barclays urged warning, warning that the speedy rise in speculative exercise in retail-dominated segments may result in elevated volatility within the coming months.
