Regarding bubble calls (GameStop might qualify or Bitcoin), no major financial imbalances are being warned. and evidence of speculative excess in some markets does not imply that there is a risk asset bubble in general. It is worth remembering that cryptocurrency has gone through a boom and bust cycle before in 2016-18 without broader implications for other asset markets and both of these examples remain a small part of most portfolios, so should not necessarily be considered a barometer of overall investor sentiment or asset valuations.

And as we showed earlier, despite the euphoria in some market sectors, the price of some risky assets, including equities in the UK and Europe, remains below pre-pandemic levels, the price of some risk assets, including equities in the UK and Europe, remain below their pre-pandemic levels.

Otherwise, S&P 500 earnings yields are still well above 10-year real yields. In other words, the current valuation of U.S. equities can be justified in the context of negative real interest rates.

Previous collapses in the U.S. stock market, such as in 2000 when the dot-com bubble burst, have been preceded by a period in which stock prices have been bid up to the point where the earnings yield has fallen below the real yield on 10-year U.S. Treasury bonds. But today, the S&P 500 earnings yield is still well above 10-year real yields.

Relative valuations of U.S. Treasury stocks and bonds.