The market is flooded with following investors, and cash flows are pouring into assets in everything from solar energy and cloud computing to novel investment vehicles like SPAC companies.

Looking at financial markets these days, asset bubbles seem everywhere. In the US, big names including Tesla have consistently peaked, while strategists at Bank of America warn that a bubble is forming and the market is about to enter a period of correction.

At the same time, the army of individual investors is growing stronger, challenging the legitimacy of Wall Street and turning previously unknown stocks into a fever, such as GameStop.

The market is flooded with following investors, and cash flows are pouring into assets in everything from solar energy and cloud computing to novel investment vehicles like SPAC companies. And of course, Bitcoin cannot be ignored - 2017's all-loved bubble returned and hit a new high in early 2021 after quadrupling in price last year.


There are specific numbers that prove the enormous extent of the bubble: GameStop shares have risen 8,000% in just 12 months, the S&P index has risen 70% from its bottom since March last year. And $ 1,800 billion is the amount of money that the 500 richest people in the world added to their fortune last year.

What caused this speculative fever? It is a pandemic. Policymakers have pumped trillions of dollars to stimulate and support the economy to fight the effects of the epidemic. However, that money turned out to help blow up the property bubbles. Governments alone have spent about $ 12,000 billion through fiscal stimulus packages, while the Federal Reserve is still buying $ 120 billion of bonds per month to keep borrowing costs in economies. leading at a low level.

What does this fever mean? In the context that the yields of even the riskiest debts are lower than ever, investors quickly chase after all fevers in search of the next bargain. No one knows for certain when these bubbles will explode, but the warnings are getting louder.

History shows how much damage the bubbles do when they burst. From primitive financial bubbles like the tulip bubble of the 17th century to recent examples like the dot-com bubble of 2001 to the subprime debt disaster that spawned the 2008 financial crisis, to date. we still feel the consequences today.

This time, the world is revolving around the hope that vaccines will return the world to normal orbit. However, any fall can cause investors to rush to sell, which causes confidence to decline on a large scale. If the financial market collapses and the economic recession comes at the same time that the world is suffering from Covid-19 as it is now, the world will take many years to recover.

Even if the global economy recovers strongly, it will be a challenge because assets, including stocks, are very expensive. Central banks and governments may start to withdraw stimulus packages to control debt risks and rising inflation, but this will cause investors who are accustomed to loosening monetary policy to panic.