Barclays study forecasts fewer bubbles but increases in risk premia

The world is moving past the high-watermark for abundant savings with fewer asset bubbles but with increases in risk premia, according to the latest Barclays Equity Gilt study.

Barclays Capital strategist Tim Bond believes recent market crises were a product of changes in global savings flows, when abundant liquidity weakened the collective discrimination of risk/reward in investment, resulting in misallocations of savings and asset bubbles. He adds the frequency of bubbles might therefore decline, but the same trend will increase risk premia, particularly for bonds, in the decade ahead. He adds equities are likely to earn an above average risk premium over government bond investments in the next 10 years. The study, which has been published since 1956, n...