The question of whether we are in an ‘AI bubble’ or not is one of great concern to many of our clients. Recently the phrase, “is the stock market a bubble,” has been searched more than any time in history on Google and, yes, ChatGPT. The word “bubble” alone seems designed to send chills up all our backs, as some of the most famous of recent times – The Great Nikkei Bubble (late 80s), the Southeast Asia Bubble (mid 90s), the Dot-com (Technology-Media-Telecom) Bubble (late 90s) and the Real Estate Bubble (2006-07) – all burst in spectacular fashion. They led, respectively, to 50%-plus market declines and broad economic pain, including Japan’s Lost Decade, Southeast Asia’s multi-year recession, the 2000-03 US economic recession and the Global Great Recession. Interestingly, all evolved out of a bull market with strong fundamentals.

What, if any, is the connection between a bull and a bubble? What signs can help us guess when a bubble is at risk of bursting and becoming a bear? Or more to the point, when should we start worrying whether the present bull is evolving into another bubble that will end in tears?

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