The Pendulum Swings: Is the “America Bubble” about to end?
The beauty of tools like ChatGPT is that they can take the ramblings of a fool like myself and transform them into something readable. Yet, even polished words can’t shake my uneasy feeling about the state of the world in 2024. Society has a habit of veering too far in one direction, often mistaking momentum for permanence, and I can’t help but feel we’re repeating history.
Edward Chancellor’s Devil Take the Hindmost provides a rich history of financial speculation, chronicling the highs and inevitable lows of market mania. From the South Sea Bubble to the Dot-Com crash, the book is a reminder that financial excess often comes with a price. And as I observe the current state of the U.S. market, I wonder: Should we be preparing for the end of the era of the “America Bubble”?
A Historical Perspective on Speculation
Chancellor’s book serves as a cautionary tale, exploring speculative frenzies that once seemed unstoppable but ultimately collapsed under their own weight. The South Sea Bubble of the 18th century, for example, saw investors pouring money into promises of wealth tied to dubious trade monopolies. At the height of the mania, shares soared by over 1,000%, only to plummet as reality set in. Absurd ventures, such as “a company for carrying out an undertaking of great advantage, but nobody to know what it is,” highlight just how irrational markets can become when swept up in euphoria.
The Mississippi Bubble in France followed a similar trajectory, as speculative fever drove up the value of the Mississippi Company, only to leave financial ruin in its wake. Fast-forward to 19th-century Britain, where Railway Mania gripped the nation. Investors sunk fortunes into railway projects, many of which were neither practical nor profitable. When the bubble burst, it wiped out years of wealth in an instant.
The 1920s stock market boom in the United States epitomized the belief in perpetual growth. A decade of prosperity fueled confidence that stock prices could only go up—until they didn’t. The infamous crash of 1929 not only decimated the market but also ushered in the Great Depression.
In the 1980s, Japan experienced an asset bubble so extreme that the land beneath Tokyo’s Imperial Palace was valued higher than the entire state of California. This speculative fervor led to Japan’s “Lost Decade,” a prolonged period of economic stagnation.
And who can forget the Dot-Com Bubble of the early 2000s? Companies with no revenue and shaky business models commanded astronomical valuations. Cisco Systems reached a market cap of $555 billion, making it more valuable than all of Germany’s stock market and three times the GDP of Saudi Arabia. When the bubble burst, it erased trillions in market value.
2024: The World Doesn’t Make Sense Anymore
As I reflect on 2024, I can’t shake the feeling that we’re on the brink of another inflection point. The total market capitalization of the top 500 U.S. companies now exceeds $50 trillion, accounting for 60% of the world’s total stock market value. Apple alone is valued at over $3 trillion, making it worth more than twice Germany’s GDP and half the combined market cap of every public company in China.
These comparisons are staggering. To put it another way, Apple’s valuation is greater than the GDP of India or the total output of the African continent. Microsoft, another tech giant, similarly dwarfs the economies of major nations. At some point, these massive valuations become untenable relative to other assets worldwide.
While there are valid reasons for America’s market dominance—strong corporate earnings, technological innovation, and a resilient economy—such disparities create imbalances that markets have historically corrected. For example, Japan’s economy in the 1980s similarly held a disproportionate share of global wealth, only to see it contract dramatically in the years that followed. Similarly, during the Dot-Com era, U.S. tech valuations outpaced global counterparts, but the market ultimately rebalanced.
Why American Exceptionalism Feels Unsustainable
The market, news outlets, magazines, business leaders, and even CEOs I know personally seem unanimous in their belief that American exceptionalism will not only continue but accelerate. This one-sided wagon has been rolling along for years, but how long can it defy gravity? History has taught me that just because something is overvalued doesn’t mean it can’t become even more extreme before reality sets in.
Yet, there are cracks in the foundation. The U.S. operates on a two-year election cycle, which leaves little room for long-term planning. Politicians spend one year governing and the next raising funds. In 2024, we face the possibility of a returning president who previously refused to accept election results. If any of Donald Trump’s proposed policies were to come to fruition—such as massive government spending cuts, mass deportations, or broad tariffs—the very factors underpinning America’s market outperformance could be at risk.
The Risk of Reallocation
Markets don’t exist in a vacuum, and global capital allocation matters. A simple shift of funds away from U.S. markets toward other regions could have profound implications. For decades, America has been the beneficiary of global investor confidence, but as valuations become increasingly lopsided, the incentive to diversify grows stronger. If even a fraction of the capital concentrated in the U.S. market were to flow elsewhere, the ripple effects would be significant.
Europe and Asia, for instance, have seen their share of speculative booms and busts, but they also offer opportunities for growth and diversification. The idea that America’s dominance will remain unchecked forever ignores the lessons of history. No market or economy can maintain such an imbalance indefinitely.
The Pendulum Begins to Swing
In many ways, the pendulum already seems to be swinging back. Geopolitical tensions, inflationary pressures, and slowing global growth suggest that the current trajectory is unsustainable. Capital flows, which have propped up U.S. markets, could begin to favor other regions. And while America has been seen as a stable bastion of capitalism, the reality of short-term political cycles and internal divisions may challenge that perception.
One lesson I’ve learned the hard way is that markets can remain irrational longer than we expect. Overvaluation doesn’t mean immediate collapse, and bubbles often expand beyond what seems possible. But when they burst, the consequences are swift and unforgiving.
Lessons from History
What can history teach us about today’s market dynamics? First, speculative manias are often driven by a mix of innovation and greed. Whether it’s railroads, the internet, or artificial intelligence, each era has its catalysts for euphoria. Second, bubbles don’t always burst due to a single event; often, it’s a gradual erosion of confidence that leads to collapse. Finally, the aftermath of a bubble can be long and painful, as markets and economies work to rebuild.
As I consider the state of the world in 2024, I’m reminded of the adage: “History doesn’t repeat itself, but it often rhymes.” The parallels between past speculative manias and today’s market environment are striking. Whether this is the start of the next great bubble or simply another chapter in America’s market dominance remains to be seen.
Preparing for the Future
My role is not to predict the exact timing of market tops or bottoms but to think 2-3 years ahead and probability-weight potential outcomes. While it’s tempting to assume that current trends will persist, history reminds us that no era of excess lasts forever. The challenge lies in staying vigilant, identifying shifts as they occur, and preparing for a range of scenarios.
The pendulum always swings, and when it does, it often surprises those who assumed it wouldn’t. Whether we’re witnessing the “America Bubble” of 2025 or simply the next phase of market evolution, one thing is clear: the world doesn’t make much sense right now, but clarity often comes only in hindsight.
Global Macro 