Above the Noise: Perspective on bubble fears

Key arguments

• AI capex is surging but earnings are rising too, and forward P/E is roughly one third of the 2000 peak, so the bubble case is weak today.
• CoreWeave's widening borrowing costs showed investor discrimination among AI players; investment-grade and high-yield spreads did not widen significantly, and the S&P 500 sat just 2.5% below its record.
• Economic growth, earnings, inflation and Fed policy have mattered more to markets than which party controls Congress; divided government would likely restrain new fiscal packages.
• Floating-rate senior loans offer higher income, but selectivity is key as highly leveraged borrowers built at low rates feel pressure.

Corresponding source evidence

1. Many investors today may have been shaped by the technology bubble in 2000 and the housing bubble in 2008. · 2000
2. The market’s price-to-forward earnings ratio, a valuation metric, has been essentially unchanged from five years ago, and is roughly one third of what it was at the peak of the tech bubble.5 A lot of investment isn’t evidence of a bubble.
3. … the spike in Treasury yields this year6 was likely not primarily about concerns over the sustainability of US debt, or the bill finally coming due, as Stanley Druckenmiller, Ray Dalio, and any number of other billionaires warned.