Hartnett Warns of Stock Market Bubble Risk Amid Monetary Policy Easing and Regulatory Changes

Bank of America strategists led by Michael Hartnett warn of rising bubble risks in stock markets due to loose monetary policy and easing financial regulation. The world policy rate has fallen to 4.4% from 4.8% in the past year and is forecast to drop further to 3.9% in the coming 12 months. Policymakers are considering changes to boost retail investor participation, which could lead to higher volatility and a bigger bubble.

Bank of America (BofA) strategists, led by Michael Hartnett, have renewed their warnings about the increasing risk of a stock market bubble due to loose monetary policy and easing financial regulations. The world policy rate has fallen to 4.4% from 4.8% in the past year and is forecast to drop further to 3.9% in the coming 12 months [3]. Policymakers are considering regulatory changes to boost the share of retail investors in the US, which could lead to higher volatility and a bigger bubble [3].

Hartnett's team notes that the Federal Reserve has maintained a steady stance on interest rates, but several officials have expressed support for rate cuts as early as next month. This shift in expectations has led investors to adjust their strategies accordingly. Additionally, President Donald Trump's proposed tax cuts could further fuel market optimism [1].

BofA analysts suggest that the best way to navigate this environment is by owning US growth stocks and international value stocks. This strategy aims to balance risk and reward while providing exposure to growth in both US and international markets [1].

Meanwhile, the Monetary Authority of Singapore (MAS) has allocated S$1.1 billion ($860 million) to asset managers as part of its Equity Market Development Programme (EQDP). The goal is to increase liquidity and broader investor interest in companies listed on the Singapore stock exchange [2]. This initiative comes amidst concerns about the market's low trading volume and primary and secondary share sales, which have slumped compared to previous years.

Investors and financial professionals should remain vigilant about these developments and adjust their strategies accordingly. The evolving regulatory environment and monetary policy changes could significantly impact market dynamics, and it is crucial to stay informed about these trends.

References:
[1] https://www.aol.com/bank-america-explains-market-bubble-164616266.html
[2] https://www.tradingview.com/news/reuters.com,2025:newsml_L6N3TL0GA:0-singapore-stock-market-subsidies-are-worth-a-shot/
[3] https://www.bloomberg.com/news/articles/2025-07-25/bofa-s-hartnett-renews-warnings-around-bubble-risks-for-stocks