Reference News Network, July 30 report - According to the website of the UK's Financial Times on July 25, the continuous rise on Wall Street this summer has pushed stock valuations to near record levels, prompting analysts to issue warnings that a "frenzied" market is entering a bubble period.

The S&P 500 index has set new highs this month, while the spread between U.S. corporate bonds and government bonds is approaching the lowest level in decades, in stark contrast to the market crash in April this year caused by Trump's trade war with China.

Even as the current president signed an agreement confirming that U.S. import tariffs are at their highest levels in decades, signs of a market bubble continue to emerge. High-valuation tech stocks have continued to surge, reaching new highs - NVIDIA became the first company to break through a $4 trillion market capitalization. At the same time, the "meme stock" trend from 2021 has made a comeback, with retail investors flocking to buy shares of camera manufacturer GoPro and donut chain KK Donuts.

Dan Ivaschenko, Chief Investment Officer of PIMCO, which manages $2.1 trillion in assets, said: "I think it's similar to some early signs seen during the internet bubble in the late 1990s and early 2000s. Investors often invest with the mindset of buying a lottery ticket... This situation is very dangerous."

According to Bloomberg data, the price-to-sales ratio of S&P 500 index components has risen above 3.3 times, setting a new historical high.

Barclays' "market frenzy" indicator has surged to twice the normal level, entering a range that historically represented asset bubbles.

Stefano Pascale, head of U.S. equity derivatives strategy at Barclays, said: "This indicator clearly shows that the market is in a state of frenzy."

Investors were relieved by the agreement that sets import tariffs on Japanese products exported to the U.S. at 15% and the potential for similar agreements between the U.S. and the EU. Although these tariffs are much higher than before Trump took office, they are far less severe than the tariffs he threatened to implement on "Liberation Day," which previously led to market crashes.

Luca Paolini, Chief Strategy Officer at Pictet Asset Management, said: "Although these preliminary agreements are not ideal, investors are satisfied as long as they can avoid a full-scale trade war."

Concerns about the U.S. government's excessive debt and the Federal Reserve's ability to maintain independence have hit U.S. Treasuries and the dollar, but the stock market has remained immune to these shocks. The dollar has fallen nearly 10% against a basket of major currencies this year.

Many large technology stocks, which have been the main drivers of the U.S. stock market's rise in recent years, have helped the market rebound from earlier selling this year. Since the mid-April low, the stock prices of chipmaker NVIDIA and the parent company of Facebook, Meta Platforms, have risen by 100% and 50%, respectively.

Rob Arnott, founder and chairman of Asset Allocation Research, said that looking across the S&P 500 index, metrics such as price-to-sales, price-to-cash flow, price-to-book, and dividend yield are all near historical highs. He believes that investing in these few tech stocks that dominate the index carries high risk, equivalent to taking great risks for small gains.

He said: "The pricing of the artificial intelligence companies currently dominating the market assumes that they will not face competitors in the future. Meanwhile, investors are cautious about moving away from popular and bubble-like stocks, because if you act too early, you will have trouble."

Some smaller companies have even performed better. Strong sales from government contracts have helped defense group Palantir's stock rise 140% since hitting a low in April. Bitcoin mining company Coinbase saw its stock soar nearly 180% due to the optimistic sentiment in the digital asset industry sparked by Trump's victory in November last year.

As more companies and investors pour into crypto assets that are being incorporated into the mainstream financial market, Bitcoin's price broke through the $120,000 threshold for the first time last week.

This fervor has spread to the corporate credit sector, with the spread between high-rated U.S. corporate bonds and benchmark government bonds narrowing to 0.8 percentage points, approaching the lowest level since 2005.

Deutsche Bank analysts recently warned in a report that increasing investor borrowing to buy stocks may indicate that the stock market has entered the "most frenzied" period since 1999 and 2007. (Translated by Yang Xuele)

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