Wall Street Pros From Dan Fuss to Bob Michele on Bubble Trouble

The Federal Reserve may be fretting over the speculative euphoria in crypto, SPACs and meme stocks, but plenty on Wall Street see bubble risks growing across all the systemically important assets.

Everything from European bonds and U.S. Treasuries to high-yield credit and tech stocks is trading near the highest valuations in decades -- even as the inflation bogeyman risks breaking out at long last.

Market participants from Goldman Sachs Group Inc. to BlackRock Inc. are divided on whether all this constitutes an unsustainable frenzy. To Dan Fuss, the legendary 87-year-old vice chairman at Loomis Sayles & Co. LP, it certainly looks that way thanks to unprecedented liquidity that is now set to tighten on good economic news.

Meanwhile, Kathy Jones of Charles Schwab & Co. is telling clients to beware the “nuttiness” in junk debt. And JPMorgan Asset Management’s Bob Michele is calling on Fed officials to discuss tapering asset purchases soon enough, before market bubbles form.

Others are more sanguine -- betting that the economic reopening and the re-leveraging cycle will pave the way for more cross-asset gains.

Interviews have been edited for clarity.

Dan Fuss, vice chairman, Loomis Sayles

“We are in ‘bubble’ territory. It is primarily a liquidity bubble, combined with the resulting valuation distortion. Stocks with high P/Es, marginal credit bonds, and pooled vehicles are the most vulnerable. In the 1960s and 1970s, I was lucky enough to spot the small stock valuation bubble and the growth stock bubble. The similarity between then and now was valuation. This one is a liquidity bubble that is unique in my experience.