Retail investors are pushing U.S. gold and stock prices into bubble territory, posing the risk of a chaotic correction, the Bank for International Settlements (BIS) warned this week. In turn, well-known investors and analysts argue about the future of artificial intelligence, weapons and oil prices.
BIS: Bubbles burst, bringing sharp and sudden corrections
Gold, which has increased in price by over 60% this year. to record levels, is experiencing its best year since 1979. In turn, the American S&P 500 index, which broke the record this week, has gained over 17% this year thanks to the rally of technology companies, and this year's growth of NASDAQ exceeds 20%.
In its quarterly review, the BIS says gold and U.S. equities are showing bubble characteristics, such as retail investor enthusiasm, rising valuations and hype in media headlines.
“The last few quarters have been the only time in the last 50 years that gold and equities have entered this territory [bańki – red.] Together. After a phase of rapid growth, the bubble usually bursts and brings a sharp and sudden correction,” the institution says in the report.
BIS notes that retail investor funds accounted for the majority of inflows into U.S. gold and equity ETFs over the past three months. while institutional investors limited their investments in American stocks and did not change their position on gold. The strengthened role of retail investors in these markets poses a threat to stability as this category of investors tends to follow the herd instinct.
“This would amplify price fluctuations if there was a sudden sell-off,” the bank warns.
The rally in US technology companies raises concerns due to their valuations, and a correction in these stocks could threaten broader stock markets and the economy, warned an international institution, often called the “bank of central banks”.
Howard Marks: Investing in AI for 30 years is pure speculation
Wall Street is lending money generously and cheaply to tech companies so they can finance their massive capital investments in artificial intelligence, even though it may take years to see the technology's benefits, warns Howard Marks, founder of Oaktree Capital Management.
The financial world is behaving in a “speculative” manner when granting such loans because the growth in demand for AI technology is “completely unpredictable,” says a Wall Street veteran.
As an example, he cites the 30-year bonds of Meta Platforms and Alphabet, which are intended to finance these companies' investments in AI. The yield on these bonds is only about 100 basis points higher than the yield on U.S. Treasuries of the same maturity.
– Is it reasonable to accept 30 years of technological uncertainty in a fixed income investment that yields only slightly more than risk-free debt? Will debt-financed investments – in chips and data centers – maintain their levels of productivity long enough to pay off these 30-year liabilities? – asks Marks in one of his blog entries.
According to him, technology companies are forced to “aggressively” take out debt to invest in AI because of the belief that in the artificial intelligence arms race, “the winner takes all.” So they try to get ahead of competitors who are financially weaker. A veteran of the investment world admits that only after many years will it be possible to assess whether the current enthusiasm around artificial intelligence is rational.
“My advice would be not to put everything you have into it without first realizing that you risk being left in ruins if things don't go right,” Marks says. – Likewise, you cannot stand completely on the sidelines, because you risk missing one of the greatest technological advances.
Calling artificial intelligence a “genie out of the bottle,” Marx fears the “terrifying” prospects for the labor market and how much benefit will be felt by society at large.
– I am concerned that a small group of highly educated multi-billionaires will be looked at as those who created the technology that took the jobs of millions of people. This portends even greater social and political divisions than we currently have, which would make the world even more susceptible to populist demagogy, warns Marx.
Morgan Stanley: The stars favor the arms industry
European defense industry shares are set to rally as Germany prepares to approve record defense spending, Morgan Stanley analysts believe.
The first on the list of Top Picks in the sector, analysts of the American bank, indicated Rheinmetall, whose shares have the potential to increase by over 50%. The positive attitude is related to Germany's planned defense spending. Next week, the German parliament is expected to approve a military procurement package worth EUR 52 billion. These are record spendings, resulting from Donald Trump's pressure on Europe to take greater responsibility for its own defense.
By examining the historical quotations of European shares from the defense sector, analysts discovered seasonality – these shares are characterized by strong increases in the first months of the year.
“The stars aligned for a strong seasonal recovery. Stock price inertia always strengthens towards the end of the year and gathers momentum in January,” Morgan Stanley analysts said in an analysis cited by Bloomberg.
The report comes as European defense stocks have retreated from record highs over the past few months. Rheinmetall fell by about 20 percent, and Renk Group by over 30 percent. The decline in the sector was caused by the increased US pressure on Ukraine to agree to the peace plan.
Morgan Stanley also justifies its optimism regarding the prospects for defense stocks by saying that global investors do not yet own a large number of shares in this sector. 56 percent global equity funds have zero positions in the European defense sector, and 81 percent funds do not hold Rheinmetall shares.
Tom Lee: S&P 500 will reach 7,700 points
The American S&P 500 index will reach 7,700 points by the end of next year, says Tom Lee, co-founder of Fundstrat Global Advisors, an investment management company.which is known on Wall Street for its exceptionally accurate, but also highly optimistic forecasts. This target level suggests growth potential of just over 10%. from the current S&P 500 level.
The forecast is based on the assumption that the Fed will continue its easing monetary policy and the new Federal Reserve will not want to stifle the bull market.
– We believe that there will be a lot of skepticism in 2026, as well as a new Fed composition, which will translate into approximately 10%. growth – said the analyst.
This skepticism is addressed, among others, by: express investors' concerns that after three years in a row, in which American shares returned 20%. and more return, they cannot grow any further. However, Lee calculated that since 1928, the S&P 500 index, after three consecutive strong years, grew on average another 12 percent in the fourth year.
The largest banks: Oil will become cheaper
The price of oil has fallen by 17% this year. – this is the worst year for this raw material since the pandemic. According to the average forecasts of five large banks, the pressure on prices will continue also next year.
In 2026, Brent crude oil should drop to approximately USD 59 per barrel, i.e. by another 5 percent. from the current price level – indicates the average of forecasts by Bank of America, Goldman Sachs, Citigroup, JPMorgan and Morgan Stanley.
The forecast is based on the assumption that next year the global oil market will be burdened with an excess supply of approximately 2.2 million barrels per day due to production exceeding demand. For comparison, the International Energy Agency (IEA) forecasts that the excess supply of oil will reach a record 4 million barrels per day next year.
