Macro Minute: Week of June 22, 2026
Today I want to touch briefly of a very triggering topic in the investing world, and that is bubbles. First off, what even is a bubble? I would argue that a bubble is when the valuation is not supported by long-term fundamentals. In the late 1990’s Alan Greenspan used the term “irrational exuberance”, when describing the price action of some stocks back then. While some people like to say and think that bubbles happen all of the time, I would say that they are rare but can occur. To me it is usually characterized by an investing public that is so enamored by the future expectations that they will pay any price to have a piece of that future. When that future comes too slowly or doesn’t materialize like hypothesized, prices descend very quickly.
Why am I bringing this up today? Do I think that the market is in a bubble? To answer that I would say I don’t know, but I don’t think so. I do think that the price of some securities has a lot of idealized future priced into them, but that is almost always the case. It is why I find growth investing so hard, because the valuations tend to be higher. The reason I bring up bubbles today is because I have heard it said that the current market is a bubble, but it is the earnings that are in a bubble. The earnings of the hyperscalers and AI companies are being boosted beyond realistic expectations. This earnings bubble is bringing the price of the companies up. The fear is that when these earnings naturally go back down, that it will draw the price down as well. This argument is very different than historical analogues. Historically prices run ahead of earnings. In this scenario, earnings are running ahead of prices.
While the discussions of bubbles are always around, I try to stay pragmatic in my investing. Bubble spotting is akin to market timing and are the bane of long-term investing. To me they distract from the patient long-term compounder. I maintain that the rate of change in inflation and economic growth are the more important variables to watch on how to position portfolios and that market timing/bubble spotting are a sideshow. The patient investor should build a portfolio that has the appropriate amount of risk and is able to capture many different return streams, not just the bubbling asset class, if there is one. This is an encouragement to not get too carried away in the evergreen discussions around bubbles and maintain your focus on your race and time horizons.
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