Five for Friday

Bubble, Market Top, Social Security, January, Did You Know 

1. Bubble? 

One of the most common questions I get is, “Are we in an AI bubble?” My answer has been – and still is – “no” for two main reasons. The first is price. Asset bubbles typically feature a parabolic price move in the underlying asset, often culminating in a “blow-off top” (when price goes almost vertical in a short period). The chart to the right helps clarify the difference between a bull market and a bubble. Second is sentiment. Bubbles are emotionally-driven, with prices increasingly dictated by euphoric sentiment and fear of missing out (rather than by the fundamentals). On that front, I’m reassured by the scrutiny of Big Tech's spending plans and funding sources (debt vs. cash). It’s a good sign that investors still care about cash flows and return on capital.

2. Market Top?

If we broaden our focus from “is it a bubble?” to “is the bull market in danger?” the signs pointing to a “yes” are still difficult to find. Our partners at Strategas (a Baird Company) publish a Bull Market Top Checklist (shown in the table below) as a way to measure the status of a bull market at any given time. As Strategas writes, “Not a single element of our checklist suggests that the broader market is in danger. Earnings growth remains robust, long-term interest rates are quiescent, and market leadership has broadened beyond the Technology sector. Some consolidation in Tech, in our opinion, increases the chances that the bull market continues to run.”

3. Social Security

Social security is back in the news with the release of the CBO’s 2026-36 outlook. Though the numbers involved have changed slightly with this new release, it’s still worth reading Baird’s Tim Steffen from last October on the future of the program.

4. January

. There’s an old investing adage that “as goes January, so goes the year,” (the thesis being that once late-year tax loss selling abates, January’s market performance indicates whether marginal demand is risk‑on or risk‑off and reflects the broader trend). But does the data back it up? Let’s find out. Over the last 75 years, the S&P 500 was positive in January 45 times. In those 45 years, the average full-year return was 17% (positive 89% of the time). For the 30 periods in which January was negative, the average full-year return was -2% (positive 47% of the time). All in all, we’ll take it as a good sign that this most recent January finished in the black.

5. Did You Know

Did you know that fake reviews cost online consumers an estimated $771 billion in 2025 ($0.12 on the dollar!) with costs expected to pass $1 trillion by 2030. Per Capital One, fake reviews boost product sales 12.5% in the first 2 weeks.

Disclosures

This is not a complete analysis of every material fact regarding any company, industry or security. The opinions expressed here reflect our judgment at this date and are subject to change. The information has been obtained from sources we consider to be reliable, but we cannot guarantee the accuracy. Market and economic statistics, unless otherwise cited, are from data provider FactSet.

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