Jeffrey Kleintop of Charles Schwab & Co. recently looked at a few asset classes for signs of bubbles. The assets were selected based on questions from investors. Kleintop didn’t find any that met his definition of a bubble. But he also cautioned that some of the assets carry a lot of risk for investors at this point, and bubbles often are identifiable only after they burst.
On internet retailers: This small group of stocks make up a sub-industry of the retailing industry within the consumer discretionary sector, not a whole sector of the stock market (like technology) or the economy (like housing). The small size of this sub-industry relative to the overall stock market makes it difficult to label its growth a typical bubble and may limit the ripple effect on the broader market were it to crash. Unlike typical bubbles which tend to foster a purely optimistic outlook, these companies have already had a negative impact on the stocks of their traditional retail peers, leaving the overall retailing industry (composed of 10 sub-industries including internet retailers) up a smaller 500% over the same period.