Federal Reserve chair Jerome Powell, like his peers at other major central banks around the globe, has gotten his wish: Investors have gone from fearing a once-in-a-generation recession to feasting on risk. But now policy makers have another problemâ€”the potential that investors will get so carried away that they rip a new hole in the economy.
Reason for concern can be found just about everywhere. Armchair investors have flocked to trading apps, snapping up everything from Tesla stock to bitcoin. A survey by pension consulting firm Mercer found that European institutions have made big shifts over the years to assets that are seldom traded and harder to valueâ€”things like real assets, which include real estate and natural resources, and private-equity investments in non-public companies. And though tech stocks drove the equity markets through multiple record highs in 2020, Wall Street analysts say itâ€™s not the time to pull back on them.
Welcome to the high-risk economy. With interest rates on government bonds hovering around record lowsâ€”and not expected to go anywhere anytime soonâ€”investors of all kinds are scrambling for riskier assets that offer growth. It all adds up to a world in which investors are, seemingly permanently, taking ever more risk.