“Investors Sound Alarm on Market Bubble as Bull Run Rages On”
Fears are growing that stock gains are outpacing fundamental value, even as the S&P 500 continues its record-breaking bull run.
Trade wars and DeepSeek’s AI challenge haven’t dampened enthusiasm—meme stocks are back, options trading is surging, and Bitcoin hovers around $100,000. Some traders worry that rising speculation could trigger sharp corrections. “There have been signs of froth for a while,” warns Seema Shah, chief global strategist at Principal Asset Management. “The market is vulnerable to disappointment.”
A major red flag? Small investors are piling into a few hot stocks.
Palantir surged 24% in one day after reporting strong AI-driven growth, skyrocketing 58% this year. Strategy (formerly MicroStrategy) now has a market cap of $87 billion—nearly double the value of its Bitcoin holdings.
Meanwhile, meme stocks are making a comeback. GameStop, BlackBerry, and Chewy have all soared over 90% in the past year, fueling concerns that speculation is driving the market more than fundamentals.
Market Mania: Options Surge, Crypto Booms, and Bubble Fears Grow
Investors are watching nervously as speculation runs wild, with options trading, meme stocks, and crypto reaching new highs.
Options trading is at record levels, with 58 million contracts changing hands daily in January, according to OCC. Zero-day-to-expiry (0DTE) options—some of the market’s riskiest bets—hit an all-time high in trading volume on Jan. 31.
Speculation isn’t just in stocks. Prediction markets are booming, sports gambling is surging on DraftKings and FanDuel, and crypto is back in full force.
Bitcoin hit a record $109,224.74 in January before dipping to $97,215.64. Since Election Day, nearly $17 billion has poured into U.S.-listed spot Bitcoin ETFs. Meme coins, including $TRUMP and $MELANIA, have skyrocketed to market caps of $15 billion and $2 billion, respectively.
Meanwhile, stocks are looking pricey. The S&P 500 is trading at 22 times forward earnings—above its 10-year average and approaching dot-com bubble levels.
Strong earnings growth (up 16.7% this season) has fueled the rally, but some analysts warn that high interest rates could slow profits. With inflation heating up and Fed Chair Jerome Powell holding off on rate cuts, any shift in sentiment could shake the market.
“If inflation starts to pick up again…that will be a shock to the market,” warns Roger Aliaga-Diaz of Vanguard.