The post Brexit stock market rally is a familiar story for this economic cycle:
"Ah sharks! Things are turning bad! Nevermind! The central bankers will save us again! Buy buy buy!"
The stock market recovered sharply from the Brexit shock and in some markets, are trading in record territory. Other than the strong optimism that the central bankers will flood the market with cheap money again, there is another strong reason explaining the recent rise in the stock markets.
In a world whereby yields are negative or close to zero for most of the low risk assets, investors have been forced to chase for yields in higher risk assets pushing the prices of risk assets into dangerous bubble zones. A combination of irrational optimism and chase of yield in higher risk assets have put the world financial markets in a precarious state.
And there are 5 danger signs that this rally may not be sustainable...
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