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Are We In a Bubble?

By 12/13/2025June 23rd, 2026No Comments

“We can’t all come and go by bubble.”
–Elphaba, Wicked

As we head into the final weeks of 2025, one of the most common questions we’ve been hearing in client meetings is, “With the market up again, are we in a bubble?”

That concern makes sense. If things hold steady through December, the S&P 500 will have posted three consecutive years of double-digit gains.[1]  You might expect enthusiasm; instead, we are hearing caution, skepticism, and comparisons to past market bubbles.

Let’s break down what we are seeing and why we believe today’s market looks different.

What is a bubble, really?

Over the past decade, we’ve seen isolated bubbles (think cannabis stocks, NFTs, crypto, and meme stocks like GameStop). While there’s no precise definition, bubbles are generally seen as speculative frenzies where prices soar far beyond fundamentals. Herd behavior kicks in, company earnings are ignored, and FOMO (fear of missing out) drives the buying.

If you’ve ever considered buying something just because it was going up in value, you’ve felt that pull.

So, are we in a Tech or AI bubble?

Let’s look at the data.

First, just because stocks are expensive doesn’t automatically mean we’re in a bubble. The Technology sector, for example, is expected to grow earnings by 25% over the next 12 months, which can support higher valuations. [2]

We also frequently hear comparisons to the Dotcom bubble of the late ’90s. That period saw tech stocks surge 200% and then crash by about 75%. But as the chart below shows, today’s tech rally doesn’t resemble the Dotcom pattern. [3]  Plus, this time we are seeing actual earnings growth, not just hopes and hype.

What if the market is peaking?

That’s a fair concern. Markets do not rise forever. But even if you had the worst possible timing, history shows that long-term investors are often rewarded.

Let’s say you invested a lump sum at the market peak in 2007 — right before the global financial crisis.[4] You would have experienced a painful short-term drop, but over time, your investment would have delivered an average return of 8.6% per year through today.

Signs of a bubble? Or something else?

We are not making predictions about where the market goes next. Stocks are not cheap, and a slowdown in earnings or changes in sentiment around AI could lead to a pause or correction. That’s part of a normal market cycle.

But true bubbles usually come with euphoria. When every corner of the market is soaring and investors throw caution aside. That is not what we are seeing.

Take a look at the year-to-date performance of various asset classes. In most strong equity markets, you’d expect risk-on assets like Bitcoin to be among the top performers. Instead, gold has outperformed everything, and more speculative assets have lagged. [5] That lack of broad enthusiasm is another reason we do not believe this is a runaway bubble.

Looking ahead

As we wrap up 2025, we want to thank all of you for your continued trust. It is a privilege to support you and help simplify your financial life — through all market cycles.

If you have any questions about your portfolio, planning, or goals, please reach out. We are always here for you.

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