Between stocks, bonds, cryptos, property etc...its fairytale stuff, isnt it?
Bonds are highly valued for a number of perfectly understandable reasons. Most emanating from the 2008 crash. At that time there was a fear that counterparts would default. This has left a legacy of seeking safety over return with some investors. Legislation inspired by the crash tightened capital requirements for banks and insurance companies, pushing them towards bonds. Further legislation required pension companies to more closely match their assets with their liabilities, again pushing them toward bonds.
Stocks are highly valued because interest rates are so low. Because profits are rising. Because politicians are in tax cutting mode.
Property is highly valued, in Ireland at least, because we aren't building much of it. Because over 50% of the cost is going to the government. Because the Irish planning system, does not so much plan as say no. Because the construction industry is undercapitalised. Because the construction labour force has shrunk. Because banks are unable or unwilling to lend.
If it transpires that everything is overvalued, what then? Is the global financial system caught in a deflationary trap?
I dont think so. I believe that we may be at the beginning of an resurgence of inflation. Not this year or next but after the present period of prosperity winds down.
Money is becoming more plentiful, labour markets everywhere are tight. Politically many tensions would be dissolved by a dose of inflation.