Stock Market Bubbles

Stock Market Bubbles

Stock market bubbles occur, when the participants in the market raise the price of stock above the value. Sometimes, the bubbles grow much larger than we expect and have a great impact on the investment decisions of investors. Increase in money supply and lower interest rates are the major reasons for stock market bubbles.

The economic crisis in Greece played a major role in making some significant changes in the stock market. Greece does not have major share in the global economy; still it contributes to the uncertainties in stock markets.

The experts expect that the fiscal crisis in Greece would spread to other European countries. Portugal, Spain and Ireland have fragile economy already. Hence, the economic crisis in Greece would affect these nations significantly. This would push assets toward the debts of US government and would support the US economy to keep the interest rates low. Lower interest rates can cause stock market bubbles.

It is quite common that the bullish investors want to utilize this situation to make short term profits. However, many investment experts do not encourage them to make investment in stock market now. There is always a risk that the market panic would spread to neighboring countries. They give advice to the investors to stay away from such a volatile market.

European debt crisis is growing. The European nations may send the world stock market on a wild ride. The weak European economy would drain demand for exports from US. The US banks that hold European Government debt would reduce lending in order to preserve cash. Most of the business leaders feel that there is more risk in the global economy at present.

Most of the experts feel that it is the ideal time to invest in gold. Gold is the excellent choice for investors, who are not willing to take risk. Gold is a currency that has evolved in the marketplace for more than 5,000 years. In the pain of the post bubble period, the governments will return to backing their currencies to gold. This will increase the value of gold significantly.

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