Image Source: Pixabay
 

Things are beginning to reach bubble-like levels of froth.

This is not to say that the market is about to top, and a bear market/ crash is starting. But it’s important to note just where we are in terms of overall market sentiment.

Stocks have been in a confirmed uptrend for over 100 days. As I write this, the S&P 500 is ~10% above its 40-week moving average/ 200-day moving average. Historically, this degree of overextension above the long-term trend has marked periods of consolidation/ temporary tops. Again, this is simply worth noting to track where we are relative to the overall trend.
 

From a fundamental perspective, the S&P 500 is very richly valued with a Price to Earnings (P/E) ratio of 30. Stocks have only traded a greater multiple two other times in history: the Tech Bubble and the Pandemic Bubble. Again, this doesn’t mean stocks can’t go up from here… but we’re definitely in bubble territory.

Finally, we’re beginning to see “circular” deals that suggest a degree of corporate silliness is now required to keep momentum going. The latest such deal came yesterday when Nvidia (NVDA) announced it is going to invest $100 billion in OpenAI… which is a major customer of NVDA as well as Oracle… which is also a major customer of NVDA.

I’m not alleging fraud or some kind of malfeasance here. I’m simply pointing out that when companies start investing in their customers who are also customers of their other customers… it suggests that we’re getting closer to the music “stopping” than most realize.

Again, stocks are in a bubble. The writing is on the wall. And smart investors need to do two things:

1) Ride this for as long as possible.

2) Get out of the markets once the bear market begins.

Put simply, you NEED to take advantage of this while it lasts. Because once this bubble bursts, the coming crisis will destroy trillions of dollars in wealth.

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