Markets for everything from home-building materials to bitcoin to stocks are soaring, stirring up fresh fears that global markets are in a bubble.
Rarely have so many assets been up this much at once.
The price of lumber has shot up to all-time highs. Residential home sales in the U.S. are at levels last seen in 2006, before the housing bubble collapsed. And stocks are on a tear. Benchmark indexes from the U.S. to France to Australia have all climbed to fresh highs this year, with the S&P 500 and Dow Jones Industrial Average recently hitting their 23rd and 21st records of the year, respectively.
The frenzy has extended far beyond conventional markets tracked by Wall Street firms. Bitcoin hurtled above $60,000 for the first time last month before pulling back, while Dogecoin briefly jumped to a record, driven by fans posting hashtags like #DogeDay on Twitter. In the venture-capital world, investors are offering startups five times or more the amount of money they are requesting, and the average valuation for all startups has hit a new high.
Markets’ wild ride higher has even the most seasoned investors throwing up their hands.
“This is very different to any other bubble that we’ve had ever,” said
co-founder and chief investment strategist of asset-management firm Grantham, Mayo & van Otterloo. Mr. Grantham is best known for correctly predicting the bursting of the Japanese asset bubble in the late 1980s, the dot-com bubble in 2000 and the housing crisis in 2008.
“All of the previous bubbles occurred when economic conditions looked nearly perfect. This has been quite different because the market started its incredible surge in a rather wounded economy,” he said.
Wall Street has seen this movie before. Investors’ excessive exuberance across a variety of assets has stirred comparisons with the heady days of the Roaring ’20s. The lofty valuations of technology stocks have also made for easy comparisons with the dot-com boom and bust two decades ago.
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Both of those episodes were punctuated with dramatic meltdowns from which it took stocks years to recover. The overlapping signals between then and now have led many investors to brace for what could be an even broader pullback—one that has the potential to not only wipe out wrong-footed stock pickers, but also speculators in other markets.
“If we hit a low-confidence phase and they all go together, they will [inflict] more pain on the real…
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