From an AI-fueled stock rally to record-high gold prices, the warning lights are flashing across nearly every major asset class. The question now isn’t whether markets are overheated — it’s how far the heat spreads when they finally cool.
Asset bubbles have a distinct scent. Stocks surge far beyond their earnings. Risky debt starts to look like a sure thing. For a while, it feels like gravity no longer applies — until skepticism creeps in. The only question is whether that faint alarm we hear is a dead battery or a real fire.
The S&P 500 now hovers around 6,700, nearly double its level from five years ago. The so-called “Magnificent Seven” tech giants are its rocket fuel, together making up almost 40% of the index while placing trillion-dollar bets that artificial intelligence will reshape the world.
But it’s not just tech. Gold sits near all-time highs. Coffee prices are surging. Bitcoin, the ultimate risk-on asset, has jumped more than 130% since the launch of spot exchange-traded funds in early 2024. Even junk bonds trade as if recession risk were a fairy tale. Meanwhile, home prices continue climbing amid bidding wars that stretch affordability to the breaking point.
As economist John Kenneth Galbraith once observed, bubbles always form the same way. A new idea captures imagination. Credit expands. Prices climb. Confidence turns into euphoria — until reality interrupts. Galbraith warned that the true fuel isn’t credit at all, but unbounded optimism and selective memory. Each generation convinces itself that this time is different.
This one feels no different at all.
