Finimize - 🚨 This could be a super bubble

What’s going on here?

One of the world's most famous strategists issued a brief yet impactful warning on Friday: US stocks seem headed for a historic comedown.

What does this mean?

Jeremy Grantham believes that today’s market is the third-biggest “super bubble” in history. Yup: bigger than in 1929, when US stocks plummeted 90% – and bigger than the dot-com crash, which wiped 78% off the Nasdaq. Now, Grantham was skeptical about US stocks for most of the 2010s, and his concerns never materialized. But his biggest calls were proved right – the tech and housing bubbles, to name two. And right now, there’s plenty of data backing up his take. In fact, almost every metric signals that stock valuations are stretched beyond reason. That includes a key price-to-earnings ratio, the Buffett Indicator (tracking market capitalization against the economy), and investor sentiment – which has hit euphoric levels.

Why should I care?

The bigger picture: The bigger they are, the harder they fall.

Adding insult to injury, Grantham thinks the bursting is overdue. He believes stocks should have dropped off back in 2022 – but they were bolstered by the momentum of US tech, especially after OpenAI’s deployment of ChatGPT. That might’ve made matters worse: the famed fund manager says that the longer a bubble lasts and the higher it floats, the nastier the crash.

For markets: Success isn’t always straightforward.

Grantham isn’t doubting AI’s real-world potential. But history shows that every major tech revolution – from railroads to electric power – has been interrupted by a brutal crash. That’s often the case for individual trailblazers, too. Just look at Amazon: investors sent the stock up by a walloping 4,500% between 1997 (when the company went public) and 1999. But after that joyride, Amazon fell 95% between 2000 and 2002. The lesson: it’s not enough to know where the future is headed – you have to navigate the (often bumpy) ride well too.

What’s going on here?

China vowed to use “all necessary measures” after the US president opted for yet another round of tariff threats.

What does this mean?

The president put pressure on China with a 10% duty earlier this month, along with curbs on investments between the two countries and fees for every Chinese-made ship that docks in the US. Now, he’s doubling that tariff to 20% – and it’ll just so happen to hit on the evening of China’s biggest political meeting of the year. China’s response has been measured so far. But the more the US pokes and prods, the more likely it is that the two fall into an all-out trade war.

Why should I care?

For markets: Well, it was nice while it lasted.

China’s stocks were finally on the move, with investors excited by advancements in the country’s tech sector – not least from OpenAI challenger DeepSeek. But these ever-escalating tariff threats have reminded investors that international relationships can make or break a market, and that’s stripped China of its newfound momentum. Just bear in mind that investors who lock in long-term opportunities during volatile times can eventually win back bigger rewards… if they stay the course.

The bigger picture: Everyone’s talking about Palm Beach all of a sudden.

This tariff spree isn’t just about trade, it’s part of a broader push to reshape the global financial order. The so-called Mar-a-Lago Accord proposes a weaker dollar, restructured debt, evened-out trade imbalances, and a US sovereign wealth fund. It’s ambitious, controversial, and by many accounts impractical – much like the 60,000-plus square foot mansion it’s named after. That could change the global economy and financial system as we know it. So even if only parts of the plan materialize, you’ll want to keep an eye on how it unfolds.