Are we in a bubble? Oct 2025
As a financial advisor that works to put together comprehensive financial plans for their clients, most of whom are retirees or trying to retire soon, managing portfolio risk to meet the primary goals embedded in the plan is inherently one of the toughest tasks we have.
As the conversation can seemingly change on a daily basis this year, or every time Trump mentions tariffs and their relation to China, it is necessary to bring some rational discussion to the forefront. Former Fed char Alan Greenspan famously coined the phrase ‘irrational exuberance’ in describing market conditions in the late ‘90s. Does this describe the current market conditions we are living through today? When these comments were made it was December 5, 1996. The stock market would go on to more than double before the dot-com bubble burst, but it would take until March 2009 until the S&P 500 closed above the closing price that day. Over twelve years with many hills and valleys in between, a lost decade with multiple recession despite new all-time highs in 2000 and 2007.
Many of the metrics used to evaluate overall market valuations concern market forecasters. More commentary refers to 1999 or 1929 when comparing today’s market to the past. Are things different this time? AI is going to change the world we live in, and I do not think anyone is going to dispute that, but will it be as profitable to the common investor as everyone is hoping? Or are we living through a time of irrational exuberance like the period of the late 1990’s?
The Bloomberg chart below gives us a picture of relative valuation to times past. Does this mean that there is inevitable crash coming? Absolutely not, but we are at much higher risk of correction given the current metrics. As a fiduciary who must look out for the best interest of their clients, we must disclose these risks and pair down our expectations for future returns. Bull markets do not continue forever, and there may be pain along the way. Vanguard, one of the largest asset management companies in the world, models future stock market returns for the next decade. The projections, as of September 2025, do not look great. Their most recent forecast is linked here: https://advisors.vanguard.com/insights/article/series/market-perspectives
This is why a cohesive plan focused on one’s goals, incorporating all aspects of the planning process, is essential in recommending the appropriate portfolio for our clients. At Legacy Finance, we help clients in Fresno, Clovis, and beyond ensure their financial plans are equipped to weather all storms.