Are we entering a bear market? Lots of people think so. Here are the three reasons why I disagree, writes Gav Blaxberg, CEO of Wolf Financial.
First, everyone’s bearish right now. Stocks, real estate, and crypto are all down. The Fear & Greed index even indicates extreme fear.
This level of fear doesn’t surprise me. There’s a lot of uncertainty surrounding President Trump’s tariffs. Not to mention other geopolitical uncertainties around the globe. Plus, we’ve been in a bull market for nearly 2.5 years now. The bull market has to end eventually – right?
But the truth is, bull markets don’t die of old age. They die thanks to:
1 - Outrageous valuations
2 - Euphoria
3 - Monetary policies
Let’s break each of these down…
Sky-high Valuations: Bull markets classically end when an asset class has illogical valuations. In other words, prices become detached from the asset class' underlying fundamentals. You could argue we’ve seen this with certain AI stocks. But it’s mostly been short-lived and only with certain stocks in particular -- like Palantir Technologies Inc. (PLTR) in February.
Euphoria: Bull markets die of euphoria. Think dotcom stocks in 1999, homes in 2007, or NFTs in 2021. People were buying blind thinking they’d get rich. All for it to come crashing down.
Are we seeing this today? As previously discussed, the fear and greed index is showing extreme fear. There’s nothing euphoric occurring in the markets across the board.
Monetary Policy: Are we seeing any bearish indicators from central banks? In the US, we have high inflation and paused interest rates. You could argue that’s relatively bearish.
But globally, governments are printing and rates are lowering. The US hasn’t even started QE yet. Which they eventually have to do. Plus, Trump and Treasury Secretary Scott Bessent are adamant about lowering rates.
Bull markets don’t end under these conditions. If anything, we’re in a correction before prices go higher. Most of 2025 will be a year of green candles. Bookmark it.
