The Hidden Force Keeping The Stock Bubble Crash-Proof (Hint: China)

Benzinga_recent_news11-26

Global stock markets may look stretched by traditional valuation measures, but Schroders argues that investors are underestimating the structural forces that could keep prices elevated—and even push ...

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Long-term gauges such as the cyclically adjusted price-to-earnings ratio (CAPE) and the market-cap-to-GDP measure, often cited by Warren Buffett, are flashing red, Chief Investment Officer Alex Tedder said in the report. Historically, such signals have preceded mean reversion and downside risk.\nYet, Schroders believes the current environment is different.\nOne reason is monetary policy. Short-term interest rates in many countries are expected to fall, providing support to markets, particularly in the United States, according to Tedder. Lower borrowing costs tend to boost equity valuations, as investors discount future earnings at cheaper rates.\nBut the more compelling driver, Schroders suggests, lies in structural change across emerging and developed economies.\nChina's transition into a technology powerhouse is singled out as a force that markets may be underpricing. Already evident in sectors such as electric vehicles, renewable energy and robotics, this transformation is reshaping the global competitive landscape. As confidence in China's growth story improves, demand for assets tied to its tech sector could surge, offering diversified exposure and reinforcing global equity strength.\n“All the market dynamics we have noted here lead us to believe those elevated valuations are sustainable for the time being. Short-term interest rates in many countries are likely to fall, providing support to market multiples, specifically in the U.S.,” Tedder wrote. “Structural factors, such as China's transition to becoming a technology giant (already evident in the electric vehicle, renewable energy and robotics sectors), are also probably being underestimated by the market.”\nSchroders also highlighted India and Brazil as economies where improving confidence could spur asset demand. Together with China, these markets represent a significant share of global growth potential, and their structural shifts could provide ballast to valuations that might otherwise appear unsustainable.\nEurope, too, is seen as undervalued in terms of its long-term drivers. Schroders points to technology infrastructure and the energy transition as areas where investors may be overlooking fundamental strength. As these themes gain traction, they could support higher multiples across European equities.\nThe outlook acknowledges the risks: elevated valuations are vulnerable if growth disappoints or if geopolitical shocks undermine confidence. Yet Schroders' central case is that the combination of falling rates, improving sentiment in key emerging markets, and underestimated structural drivers will sustain high valuations for the time being.\nIn short, while skeptics warn of mean reversion, Schroders sees a world where China's tech rise, Europe's energy shift, and broader emerging-market resilience could keep equity markets buoyant. For investors, the message is clear: elevated doesn't necessarily mean unsustainable.\nRead More:\nImage: Shutterstock","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0,"need_auth":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.35.12","shortVersion":"4.35.12","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2586886403","isCrawlerRequest":true}