Steve Hanke warns US stock market in bubble territory as tech rally accelerates
Economist Steve Hanke, a Johns Hopkins professor and former Reagan aide, warned that the US stock market is in bubble territory. His warning is based on his proprietary bubble detector and the bond-stock yield spread, which both signal overvaluation. The S&P 500 has reached fresh highs, driven largely by five mega-cap tech stocks: Alphabet, Nvidia, Amazon, Broadcom, and Apple. These five companies contributed roughly half of the index's gains since April 1, with Alphabet leading at a 38% advance. The equal-weighted S&P 500 has risen only 6% in the same period, highlighting the narrow breadth of the rally. The broader market context includes a historic surge: US equities added about $10 trillion in 39 days, and the Nasdaq hit 29,000 for the first time. Call option volume on the S&P 500 reached a record $2.6 trillion in notional value, with calls now accounting for 58% of all options traded. Retail investors also drove significant inflows, buying $1.1 billion of tech hardware stocks in one week. These indicators suggest extreme risk appetite reminiscent of previous market peaks. For crypto holders and wallet key owners, this macro environment could lead to increased volatility in risk assets, including cryptocurrencies. If a stock market correction occurs, crypto may face selling pressure as investors reduce risk exposure. Conversely, if the rally continues, speculative demand might spill over into crypto. Key holders should remain vigilant about market conditions that could impact asset prices and consider hedging strategies during periods of elevated risk.
Key facts
- Steve Hanke warns US stock market is in bubble territory using his detector and bond-stock yield spread.
- Five mega-cap tech stocks drove half of S&P 500 gains since April 1, with Alphabet up 38%.
- S&P 500 call option volume hit a record $2.6 trillion, with calls at 58% of options traded.
- Retail investors bought $1.1 billion of tech hardware stocks in a week, second-largest on record.
- Nasdaq hit 29,000 for first time; US equities added $10 trillion in 39 days.