How Vulnerable Are US Financial Markets?¶
Fueled by more than $1 trillion in borrowed money and rising leverage across the financial system, US stock markets may have entered bubble territory. Two developments could trigger a sharp correction: higher interest rates and a loss of confidence in the handful of tech giants driving the AI boom.
LONDON—Despite heightened geopolitical tensions and growing economic uncertainty, US equity markets continue to reach new highs while defying historic valuation norms. At41.97, the Shiller cyclically adjusted price-to-earnings (CAPE) ratio is near its record highest and well above its long-run median of roughly 16.