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박재훈투영인 프로필 사진박재훈투영인
The Bubble Clock Is Ticking (Jan 7, 2025)
created At: 3/17/2025
Neutral
Neutral
This analysis was written from a neutral perspective. We advise you to always make careful and well-informed investment decisions.
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Fact
Howard Marks’ bubble model outlines three phases: early (pessimism), growth (rising confidence), and mania (irrational exuberance). The Magnificent Seven now represent 33% of S&P 500 market cap, a level exceeding the dot-com bubble peak. U.S. stocks dominate 70%+ of MSCI World Index, an all-time high. S&P 500 has gained 26% (2023) and 25% (2024), despite high interest rates.
Opinion
The market appears to be in the final "mania" phase of a bubble, where investors ignore risks and valuations lose relevance. While economic strength may prolong the rally, history suggests extreme concentration and overconfidence rarely end well. A correction, if not a full-blown crash, may be inevitable in the coming years.
Core Sell Point
The U.S. stock market is in a late-stage bubble, with tech giants driving extreme valuation concentration. Investors should remain cautious, as past bubbles show that irrational exuberance rarely lasts.

Howard Marks outlines the three psychological phases of a market bubble, explaining how investor sentiment shifts over time. His analysis suggests that the current U.S. stock market is exhibiting late-stage bubble characteristics, driven by extreme valuation concentration in a handful of large-cap tech stocks.

1. The Three Phases of a Bubble

Early Stage (Post-Crash Pessimism)

  • Market sentiment is overwhelmingly bearish following a downturn.

  • Only a select few contrarian investors recognize potential recovery.

  • Asset prices remain undervalued, as optimism is virtually absent.

Growth Stage (Recovery & Confidence)

  • Economic indicators improve, and investor confidence builds.

  • The market rises as corporate earnings and economic conditions strengthen.

  • Investors begin to believe in sustained growth, reinforcing bullish sentiment.

Mania Stage (Irrational Exuberance)

  • Widespread overconfidence and speculation drive stock prices to extreme levels.

  • Fear of missing out (FOMO) leads novice investors to rush into the market.

  • Investors dismiss traditional valuation metrics, believing "prices can only go up."

2. Signs of a Bubble in the Current Market

Marks references Michael Cembalest (J.P. Morgan) to highlight several concerning trends:

Market Concentration:

  • The top 7 tech stocks ("Magnificent Seven") now account for 33% of S&P 500’s market cap, surpassing the 2000 dot-com bubble peak (23%).

  • U.S. stocks dominate the MSCI World Index, exceeding 70%—a historical high.

Excessive Valuations & Momentum:

  • The S&P 500 surged 26% in 2023 and 25% in 2024, despite rising interest rates.

  • High long-term bond yields and corporate earnings growth support markets for now, but unsustainable valuations remain a red flag.

Conclusion

The U.S. equity market exhibits clear signs of late-stage bubble dynamics, with extreme concentration, high valuations, and speculative behavior. While strong earnings and liquidity have prevented a crash, investors must be cautious, as past bubbles have shown that market sentiment can shift suddenly and violently.

[Compliance Note]

  • All posts by Sellsmart are for informational purposes only. Final investment decisions should be made with careful judgment and at the investor’s own risk.

  • The content of this post may be inaccurate, and any profits or losses resulting from trades are solely the responsibility of the investor.

  • Core16 may hold positions in the stocks mentioned in this post and may buy or sell them at any time.

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