Have you ever actually taken the time to study market bubbles? I mean really study them.
Everyone knows the classics: the Dutch Tulip Mania of 1636-37, the South Sea Bubble of 1720, Japan’s real estate and stock bubble of the late 1980s, and, of course, the dot-com mania of the late 1990s.
My personal favorite, though, has to be the Great Bowling Bubble of 1960 – yes, bowling.
These episodes were true manias: wild speculation detached from reality, absurd valuations, and a collapse that left investors devastated.
Now let’s be honest. Today’s market isn’t any of those things. Not even close.
What we’re dealing with now is something different: people screaming “bubble” every time prices rise in assets they don’t own.
The truth is, when most people say “bubble,” what they really mean is, “Something’s going up without me in it.”
That’s not a bubble. That’s just them being salty.
Consensus: Stocks Are Overvalued
They actually think it’s a bubble.
Ninety-one percent of fund managers believe U.S. stocks are overvalued.
91%!
This data comes from Bank of America’s Global Fund Manager Survey, one of the best snapshots we get of how portfolio managers are positioned.
When the readings reach extremes, the smarter move is usually to take the other side.
Currently, there are more of these fund managers who believe U.S. stocks are overvalued than at any other point this century.
Notice how as the Great Financial Crisis was approaching throughout 2006-07 almost none of them thought U.S. stocks were overvalued (when they actually were).
I hope you’re paying attention to how this works.
Just because you think stocks are cheap doesn’t mean they are. And they may even be “cheap” for a reason.
It works the same way with the “bubbles” you think you see. More often than not, they’re a product of our own imagination – driven by natural biases like FOMO, the Endowment Effect, or loss aversion, sometimes all at once.
In almost every case when you think something is a bubble, it’s actually just an uptrend.
Some of them could potentially turn into bubbles. But, by definition, bubbles are very rare.
They’re almost always just an uptrend.
About That Elevated VIX
We just went an entire week where stocks were up every single day and the Cboe Volatility Index (VIX) was rising right alongside them. I’m not sure that’s ever happened before.
Normally, when stocks rally, volatility falls. If that relationship gets out of whack for a day or two, it usually snaps back quickly – either stocks give some back or the VIX settles down. That’s just how the seesaw usually works.
But not this time.
This month, stocks have exploded higher. We’re talking new all-time highs across the board – the Dow, Nasdaq, NYSE Composite, S&P 500, Russell 2000, the All Country World Index – you name it.
Meanwhile, the VIX managed to climb five days in a row, and six out of seven heading into yesterday, where the VIX was at 17.
Seventeen!
If you’d told me six months ago that markets would be ripping like this, not just in the U.S. but globally, I’d have guessed the VIX would be closer to 12. Instead, it’s stubbornly elevated.
So what does that tell us? The market is pricing in fear that simply doesn’t exist. They’re scared. They think it’s a bubble. But it’s really just an uptrend.
You can see it in credit spreads – there’s no stress showing up there at all.
And if there’s no stress in credit, then the elevated VIX is just exposing the overwhelming fear among stock market investors right now.
Look at the credit spreads in this chart:
Those lines that aren’t rising alongside the VIX represent the difference between yields on lower-quality corporate bonds and the risk-free rate.
When those spreads are tight, it signals calm. When they start to blow out, that’s when you know real stress is hitting the system.
I’m not saying spreads won’t widen eventually – they always do at some point. What I’m saying is that right now, they’re not. The stress you’re seeing priced in the VIX just isn’t there in the bond market.
When Bubble?
It’s a market of stocks, at the end of the day.
If this really were some giant bubble about to implode, we’d see the signs in breadth. That’s how major tops form – participation narrows, and the generals keep marching while the soldiers are already retreating.
That’s exactly what happened before the dot-com crash in 2000, when most stocks had already been falling long before the Nasdaq finally peaked.
Same thing in 2007 – financials and homebuilders were bleeding out well ahead of the S&P 500’s last gasp before the collapse.
Breadth is real. Credit is real. Those are the things that actually matter.
And right now? They’re not flashing bubble. They’re flashing strength.
This isn’t the “end of days” moment the doomers want it to be. It’s just a bull market doing what bull markets do – climbing, confusing, and frustrating the ones who missed it.
People don’t hate bubbles. They hate not being in them.
Call it whatever you want.
History will just call it another bull market.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs