‘Fast pain if inflation jumps globally’ – Wall Street giant

INVESTMENT giant Goldman Sachs has issued a stark warning of “fast pain” coming around the corner if inflation jumps globally.

According to its global strategists an inflation jump may usher in “fast pain”, hitting both stock and bond valuations.

Goldman Sachs’ report highlighted the current conditions are reminiscent of the Roaring Twenties and the Golden Fifties.

“It has seldom been the case that all assets are expensive at the same time,” it said, referring to the rising valuations in equities, bonds and credit.

But it warned “all good things must come to an end” and “there will be a bear market, eventually”.

The dire warning was qualified by Goldman Sachs as being unlikely.

However, it comes as three of Europe’s top central banks yesterday voiced fears about financial bubbles after years of ultra-loose monetary policies.

The European Central Bank, Germany’s Bundesbank and Denmark’s National bank highlighted excessive property prices in some countries, as well as complacent investors and easy lending by some banks. The warnings highlight the ECB’s main dilemma.

Europe’s richer countries no longer need extraordinary stimulus but Mediterranean countries like Italy, Greece and Spain are just now starting to enjoy the benefits of the bloc’s economic expansion.

Even the ECB warned that increased risk-taking could inflate and possibly burst bubbles.

Concerns about excessive financial exuberance have persisted for some time.

But Alan McQuaid, chief economist at Merrion Stockbrokers, argued the benign conditions lacked any obvious economic threat.

“The eurozone is picking up ... so from an economic perspective I see no reason why the rally should stop,” he said.

Instead he predicted the shock was likely from a geopolitical event, such as an escalation of hostilities in the Middle East.

‘All good things must come to an end... there will be a bear market’