With the Fed’s rate cut in place, Wall Street has visions of another bubble—this time in emerging markets. The Dow skyrocketed 2.5% on news of the cut, but even that was dwarfed by 4.2% gains in the Bombay Sensex and 4.3% in Brazil’s Bovespa. Fast-growing economies could benefit most, the Journal explains, from easy-flowing cash.
The situation is a “mirror image of 1998,” when Asian turmoil led to free-flowing cash for fledgling tech stocks. But emerging markets have grown even amid rising interest rates, meaning they may now be less volatile. Still, analysts urge caution. “Few people are saying, ‘Oh my God, it's a bubble,’” one said. “They're saying, ‘Whoopee, it's a bubble.’”