Supersized irrational exuberance
Key Markets report for Thursday, 2 July 2026
As I underscored in this report a few weeks ago, in November 2019 I published an article titled, “The One Force Moving Stock Prices and What it Tells Us About the Future.” At the time when the Nasdaq soared into “bubble territory” and was trading well over 8,000, many analysts were starting to predict the bursting of the bubble with an imminent 30%, 50%, or 60% correction. These analysts were basing their predictions on asset valuation metrics and they thought that stock valuations were getting out of hand, deeply into irrational exuberance territory, which could not go on forever.
Very early on, I’ve thrown out asset valuation from my investment strategy toolkit. The more I read, studied and analyzed, the more it seemed like a complete and total waste of time. Something else was moving the markets and it took me, basically, a lifetime to work it out and once I did, I formulated the following specific prediction:
… the markets might not collapse. Instead, we could see a significant and sustained rise in equity markets, if central banks remain committed to supporting asset prices. Now we know. We also know that this commitment has not changed. …The Fed can’t risk tightening anymore; keeping the bubble going is the only option, requiring an ever-expanding QE. This may have sealed the endgame: an accelerating bull run accompanied by hyperinflation after which comes an epic crash.
Fast forward to 2026 and we have arrived to this:
I have to say, it’s one thing to make a prediction on the basis of abstract forces that shape asset prices. It’s something else altogether to be looking at this as a concrete reality. This really has been an accelerating bull run which, for all we know, it might not be done accelerating. We also had a period of inflation, but not hyperinflation yet. But who knows - that too might be coming.
Perhaps the most sobering aspect of the above chart is the small blip that was the “doctom bubble,” which many of us remember as an extraordinary episode when investors’ irrational exuberance stampeded over all notions of rational asset valuations and when many veteran investors found themselves lost, disoriented and, in many cases, ruined. The dotcom bubble was truly scary. I don’t even know what to call the present moment, but I get the sense it will be another one that will be talked about for decades and about which many, many books will be written…
We’ll wonder, how could people be so irrational? Couldn’t they see that stock prices were getting insanely high? Who was still buying at those levels? Who was the greatest fool? Who was to blame? People still talk and write about the epic bubble and the crash that followed nearly 100 years ago. The photograph below is a stark reminder of realities ignored, once they set back in:
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Today’s trading signals
With yesterday’s closing prices we have the following changes for the Key Markets portfolio:
