A rate hike seems likely according to Lelde Smits, in her preview of the financial week ahead.

Brace yourselves for the next financial crisis: Excessive savings and declining interest rates are caught in a feedback loop, creating more severe asset bubbles, Pimco warns.

The global bond manager's head Joachim Fels said the natural real rate of interest, the equilibrium rate at which GDP is growing at its trend rate and inflation was stable, was sitting near zero. But the US Federal Reserve is expected to lift real interest rates for the first time in almost a decade at its meeting next week.

According to Pimco, there is a strong correlation between the declining natural rate and escalating financial crises over the past few decades, and excessive savings are the common denominator.

The pervasiveness of modern financial crises meant protracted effects on global growth and inflation.

The destruction of wealth created by escalating crises feeds into higher desired savings, depressing growth and investment.

"Excess savings not only pushed down [natural real interest rates] and actual interest rates but also drove up asset prices and caused serial asset bubbles in equities, emerging markets, housing, credit, eurozone peripheral bonds and commodities," said Fels, the former chief economist at Morgan Stanley.

The lower rates in a bid to boost spending makes it more difficult for financial crises to be overcome with conventional policy tools, many already exhausted, including quantitative easing, the efficacy of which is now being questioned in the eurozone and Japan.

"There is a significant risk that central banks may not be able to deal effectively with the next crisis," Mr Fels said.

While previous crises have been contained within regions with little spillover into other economies, the past 15 years have marked a significant shift, he said, most notably the global financial crisis and the eurozone sovereign debt crisis. The pervasiveness of modern crises meant protracted effects on global growth and inflation.

"If my basic thesis that both the decline in [real interest rates] and the serial asset bubbles and financial crises can be attributable in large part to the global savings glut is right, the implications could be quite dire," Fels said.

"Despite attempts to make the financial system safer and more crisis-proof, avoiding bubbles and crises will be very difficult as long as desired savings significantly exceeds desired investment."

The only viable solution was for major countries to jointly increase spending on infrastructure, education, he said - but the political barriers to that are high.

"So, in short and thinking long-term, get used to the savings-glut-fuelled 'new neutral' and brace yourself for the next bubble and crisis," he said.

What's a bubble?

The term bubble has been readily adopted this year as a label for everything from stocks, bonds and Sydney property prices, but value asset manager Forager Funds' chief investment officer Steve Johnson said it was becoming difficult to distinguish between what was a genuine bubble and what was just expensive.

"Assume the most optimistic assumptions you can and, if you still can't make a case for investing, it's only then that you can call something a bubble," he wrote in his investment blog.

This thesis can be flipped around to uncover bargains, Johnson said.

"I'd say only when you assume the worst possible scenarios you can imagine and you can't come up with a way of losing money," he said.

"Now that we can call a lay-down misère."