As the continued rise in U.S. stocks to record highs has led to some speculation about the formation of a market bubble, analysts told CNBC that investors are not appreciating the full risk of another 1999-style bubble.
This week the S&P 500 and the Dow Jones Industrial Average both surged to record highs of 1,775.22 and 15,721 respectively. The two global benchmarks closed slightly lower on Wednesday, however, following slightly less dovish than expected comments from the Federal Reserve.
According to Michael Gayed, chief investment strategist at investment advisers Pension Partners, the healthy performance seen this year has been purely driven by the Fed's expansive quantitative easing (QE) program, rather than valuations, a sure sign of the potential for a correction.
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"You are seeing fairly sizable inflows into equities – the most since 2000, yet inflation expectations are still not trending up... [It] now appears to be the start of a potential bubble given how far U.S. equities have diverged from the underlying economy, inflation expectations and the overall reality of where we are in the economic cycle," he said.