When will the bubble burst? Cable business networks are filled with a sort of death watch for equities. The market is up 23% year to date, and the press is asking if this is too far, too fast.
Is the stock market revisiting “irrational exuberance”? Typical in these discussions are references to the run-up to the financial crisis of 2008–2009. I do believe that investors are well advised to reflect soberly on those days when bubbles burst and the average stock portfolio suffered severe damage.
Is the market rising only on the Fed’s fumes? We often hear the lament that the upward moves of stock prices are entirely due to the accommodative monetary policies of the US Federal Reserve and other central banks.
Be the first observer to predict the demise of a bubble and you’ll probably get to write a best-selling book and make millions. And there are a lot of contenders out there to call the next collapse. But is that what is going on now? Are stock returns driven by easy money, high spirits and crazy expectations? Or do fundamentals still matter?
Evidence for a bubble: Graphs are used to make the point that this is a stock market bubble, sometimes showing the Fed’s purchases of bonds — also known as quantitative easing, or QE — against the S&P 500 Index, with both rising hand in hand.