I recently polled my followers on X: Are we in a stock market bubble? The poll has 6,700 votes and counting and the results are very interesting.
64%-plus of people voted yes. Surprising? Maybe. But this shows just how people view the current S&P 500 and Nasdaq rally. When I see so many people thinking we’re in a bubble, it makes me think we’re NOT in a bubble, or at least not in a typical one.
I’ve called this a concentration bubble in a select number of large-cap stocks and a bear market in pretty much everything else. I maintain that, but the point is that the distinction of whether we are in a bubble like 2000 or not is far more nuanced.
If you’re an investor in Nvidia (NASDAQ:NVDA), you probably feel exactly like Cisco (NASDAQ:CSCO) investors felt in the lead up to March 2000 . But today’s market isn’t like the bubble of back then. The tone and tenor of this market environment is very different… but the sentiment is still the same.
That’s why I think the proper answer to my question is “maybe.” We could be in the early stages of a broader bubble for stocks, but we would need to have small-cap stocks confirm. The frenzied behavior has been centered around Nvidia, altcoins, and Bitcoin (BTC-USD). There’s no doubt that this speculative trading can continue, but the point is that this is a very odd environment and it’s a very nuanced discussion of bull or bear, melt-up or crash.
The Bottom Line
I don’t believe it’s healthy when a “market” is being driven by just a select number of outsized companies. That’s why this feels like a bubble. But most stocks simply haven’t participated.
We’re at a super interesting juncture here from my standpoint. I think there could be a rug pull that breaks the large-cap averages. I don’t think there’s a collapse set-up, but a more classic risk-off sequence here. If that happens and breadth improves into it, the benefit of the doubt goes to the bulls. If not, we could be in for some rough movements ahead.
On the date of publication, Michael Gayed did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
