Are we currently in a stock market bubble similar to the 1920s?

#1
MontyPython

MontyPython

It's Just a Flesh Wound!
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#1
Woke up this morning thinking about how well the stock market has been performing... for years. Then thought more about Trump's tariffs and how this echos the 1920s... how we similarly had a historically-bad Republican businessman (Hoover) as our President, how we had nearly identical epidemics in prior years, and how all of this seems to mirror the 1920s right here and now. Wanted an 'objective opinion' on it all, so asked Grok for an AI view on where we stand. I asked Grok:

Are we currently in a stock market bubble similar to the 1920s?

Response:

To assess whether the U.S. stock market in 2025 is in a bubble similar to the one in the 1920s, we need to compare key characteristics of the 1920s bubble with current market conditions, drawing on available data and historical parallels. Below, I’ll analyze the similarities and differences, focusing on valuation metrics, investor behavior, economic context, and external factors like tariffs, while incorporating relevant insights from recent sources.

---

### **Characteristics of the 1920s Stock Market Bubble**
The 1920s stock market bubble, culminating in the 1929 crash, had several defining features:

1. **Speculative Frenzy and Overvaluation**:
- The Dow Jones Industrial Average rose dramatically, peaking at 381 points in September 1929, driven by widespread speculation.[](https://www.britannica.com/event/stock-market-crash-of-1929)
- The average price-to-earnings (P/E) ratio of S&P Composite stocks reached 32.6 in September 1929, well above historical norms.[](https://en.wikipedia.org/wiki/Wall_Street_crash_of_1929)
- Investors, from magnates to ordinary citizens, poured money into stocks, often using margin debt (borrowing up to two-thirds of stock value). Over $8.5 billion was loaned for stock purchases, exceeding the U.S. currency supply at the time.[](https://en.wikipedia.org/wiki/Wall_Street_crash_of_1929)

2. **Technological Optimism**:
- The bubble was fueled by excitement over new technologies like radio, automobiles, and electrical power grids, leading to overinvestment in related stocks.[](https://en.wikipedia.org/wiki/Stock_market_bubble)

3. **Economic Context**:
- The "Roaring Twenties" saw strong economic growth, low unemployment, and industrial expansion, creating a sense of boundless optimism.[](https://www.investopedia.com/ask/answers/042115/what-caused-stock-market-crash-1929-preceded-great-depression.asp)
- However, underlying issues included overleveraged investors, loose credit, and economic imbalances, such as declining agricultural exports due to tariffs like the Fordney-McCumber Tariff of 1922.[](https://en.wikipedia.org/wiki/Wall_Street_crash_of_1929)

4. **Tariff Policies**:
- The Fordney-McCumber Tariff raised duties on imports, protecting domestic industries but prompting retaliatory tariffs from trading partners. This reduced U.S. exports, particularly in agriculture, and strained global trade, contributing to economic vulnerabilities.[](https://en.wikipedia.org/wiki/Wall_Street_crash_of_1929)

5. **Crash Trigger**:
- The bubble burst in October 1929, with the Dow dropping 25% over four days (Black Thursday to Black Tuesday), exacerbated by panic selling and margin calls. The crash marked the start of the Great Depression, though debates persist on whether it caused or merely coincided with it.[](https://www.britannica.com/event/stock-market-crash-of-1929)[](https://en.wikipedia.org/wiki/Wall_Street_crash_of_1929)

---

### **Current Market Conditions (2025)**
Now, let’s examine the 2025 stock market, focusing on whether it exhibits bubble-like characteristics similar to the 1920s.

1. **Valuation Metrics**:
- **High P/E Ratios**: The S&P 500’s forward P/E ratio for the top 10 companies is around 25-27, higher than the 25 seen at the peak of the dot-com bubble in 2000, and approaching the 32.6 of 1929. Apollo’s chief economist, Torsten Sløk, notes that the top 10 S&P 500 firms are “more overvalued” than during the dot-com era, driven by AI-related stocks.[](https://www.businessinsider.com/stock-market-bubble-ai-dot-com-crash-sp500-tech-valuations-2025-7)[](https://finbold.com/guide/dot-com-bubble-crash/)
- **Market Concentration**: The “Magnificent Seven” (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, Tesla) account for 32-33% of the S&P 500’s market capitalization, double their share five years ago. This concentration mirrors the 1920s, where certain sectors dominated market gains.[](https://www.oaktreecapital.com/insights/memo/on-bubble-watch)
- **Shiller P/E**: The Shiller P/E ratio for the S&P 500 is around 34 in 2025, a level only seen before major bubbles like 1929 and 1998-2000, signaling overvaluation.[](https://www.gmo.com/americas/research-library/the-great-paradox-of-the-u.s.-market_viewpoints)

- **Conclusion**: Current valuations are elevated, similar to or exceeding those of past bubbles, including the 1920s, suggesting potential overpricing.

2. **Investor Behavior and Speculation**:
- **Margin Debt**: Investors are borrowing heavily to buy stocks, with margin debt levels in 2025 reportedly at paces last seen during previous bubbles. This echoes the 1920s, where margin loans fueled speculative buying.[](https://en.wikipedia.org/wiki/Wall_Street_crash_of_1929)
- **Speculative Hype**: The AI boom has driven enthusiasm for tech stocks, with companies adding “AI” to their branding to attract investors, reminiscent of the 1920s’ excitement over new technologies or the dot-com era’s “.com” frenzy.[](https://www.nasdaq.com/articles/6-stock-market-lessons-dot-com-bubble-apply-2025)
- **Bullish Sentiment**: Bank of America reports asset managers’ exposure to the S&P 500 at a 20-year high, fueled by expectations of deregulation, tax cuts, and AI growth. This optimism parallels the “Hoover bull market” of 1929.[](https://www.wsws.org/en/articles/2025/01/06/wrfd-j06.html)[](https://www.britannica.com/event/stock-market-crash-of-1929)

- **Conclusion**: Investor behavior shows signs of “irrational exuberance,” with heavy leverage and speculative focus on AI, closely resembling the 1920s’ speculative fervor.

3. **Economic Context**:
- **Growth and Optimism**: The U.S. economy has shown resilience, with solid growth and corporate earnings driving the S&P 500 to record highs in mid-2025, despite volatility in April. This mirrors the Roaring Twenties’ economic boom.[](https://www.usbank.com/investing/financial-perspectives/market-news/is-a-market-correction-coming.html)
- **Underlying Risks**: Concerns exist about weakening consumer spending, a stagnant housing market, and limited business investment outside AI. Global economic weakness, particularly in China, the EU, and Japan, could impact the U.S. These risks echo the 1920s’ economic imbalances, like agricultural export declines.[](https://www.wsws.org/en/articles/2025/01/06/wrfd-j06.html)
- **Monetary Policy**: The Federal Reserve cut rates three times in 2024, bringing the federal funds rate to 4.25-4.50%, with only two more cuts projected for 2025. In contrast, the Fed raised rates in 1929, tightening credit before the crash. Current looser policy may fuel the bubble, unlike the 1920s’ tightening.[](https://www.usbank.com/investing/financial-perspectives/market-news/is-a-market-correction-coming.html)[](https://www.britannica.com/event/stock-market-crash-of-1929)

- **Conclusion**: While economic growth supports market gains, vulnerabilities like consumer weakness and global slowdowns resemble the 1920s’ pre-crash imbalances.

4. **Tariff Policies**:
- **2025 Tariffs**: President Trump’s “Liberation Day” tariffs, announced on March 21, 2025, imposed 10% universal tariffs on imports (excluding pharmaceuticals, semiconductors, and lumber), with higher tariffs on specific countries (e.g., 34% on China, 20% on the EU). These led to a market crash on April 2, 2025, with the Dow losing 1,344.50 points (3.22%) and the S&P 500 losing 176.96 points (3.15%), wiping out over $3 trillion in market value.[](https://en.wikipedia.org/wiki/Stock_market_crash)
- **Comparison to 1920s**: The Fordney-McCumber Tariff similarly disrupted trade, prompting retaliatory tariffs and hurting U.S. exporters, particularly farmers. The 2025 tariffs have raised inflation concerns, potentially limiting Fed rate cuts, and companies like Stanley Black & Decker report hundreds of millions in costs.[](https://www.wsws.org/en/articles/2025/01/06/wrfd-j06.html)
- **Impact**: Like the 1920s, current tariffs risk global trade tensions and economic strain, potentially exacerbating bubble conditions by increasing costs and reducing exports.

- **Conclusion**: The 2025 tariffs mirror the 1920s’ protectionist policies, with similar potential to destabilize markets and amplify economic risks.

5. **Bubble Warnings**:
- Analysts like Torsten Sløk and Jeremy Grantham warn of a bubble, particularly in AI stocks, with valuations exceeding dot-com peaks. Bank of America notes the market’s 40% rise over two years (2023-2024) is driven by AI hype and policy expectations, but high concentration risks lower long-term returns.[](https://www.businessinsider.com/stock-market-bubble-ai-dot-com-crash-sp500-tech-valuations-2025-7)[](https://www.gmo.com/americas/research-library/the-great-paradox-of-the-u.s.-market_viewpoints)[](https://www.wsws.org/en/articles/2025/01/06/wrfd-j06.html)
- Some, like Capital Economics, predict the S&P 500 could hit 6,500 by the end of 2025, a 30% rise, implying the bubble may continue inflating.[](https://finance.yahoo.com/news/stocks-bubble-keep-inflating-until-233122429.html)

- **Conclusion**: Expert warnings and historical parallels suggest a bubble, though its trajectory (continued inflation or imminent burst) remains uncertain.

---

### **Key Similarities**

- **Overvaluation**: Both periods show elevated P/E ratios (32.6 in 1929 vs. ~27 in 2025 for top firms), with market concentration in a few dominant stocks.[](https://en.wikipedia.org/wiki/Wall_Street_crash_of_1929)[](https://www.businessinsider.com/stock-market-bubble-ai-dot-com-crash-sp500-tech-valuations-2025-7)
- **Speculative Behavior**: Heavy margin debt and enthusiasm for new technologies (radio/automobiles in the 1920s, AI in 2025) drive speculative buying.[](https://en.wikipedia.org/wiki/Wall_Street_crash_of_1929)
- **Tariff Disruptions**: Protectionist tariffs in both eras (Fordney-McCumber in 1922, Trump’s tariffs in 2025) strain global trade and raise inflation risks, potentially destabilizing markets.[](https://en.wikipedia.org/wiki/Stock_market_crash)
- **Economic Optimism with Risks**: Both periods feature strong growth but underlying vulnerabilities, like trade disruptions and overleveraged investors.[](https://www.investopedia.com/ask/answers/042115/what-caused-stock-market-crash-1929-preceded-great-depression.asp)

---

### **Key Differences**

- **Company Fundamentals**: Unlike many 1920s or dot-com companies, today’s leading AI firms (e.g., Nvidia, Microsoft) are profitable with established revenue streams, though smaller AI companies may be overhyped.[](https://finbold.com/guide/dot-com-bubble-crash/)
- **Monetary Policy**: The Fed tightened policy in 1929, contributing to the crash, while 2025 sees a more accommodative stance, potentially prolonging the bubble.[](https://www.usbank.com/investing/financial-perspectives/market-news/is-a-market-correction-coming.html)[](https://www.britannica.com/event/stock-market-crash-of-1929)
- **Speed of Recovery**: The 2025 market recovered quickly from the April crash, unlike the prolonged decline post-1929, suggesting different dynamics.[](https://en.wikipedia.org/wiki/Stock_market_crash)
- **Global Context**: The 1920s bubble was U.S.-centric, while 2025 faces global economic weakness (e.g., China, EU), which could amplify risks or limit bubble growth.[](https://www.wsws.org/en/articles/2025/01/06/wrfd-j06.html)

---

### **Conclusion**

The U.S. stock market in 2025 exhibits several bubble-like characteristics similar to the 1920s: high valuations, speculative fervor driven by AI, heavy margin debt, and tariff-induced trade disruptions. The S&P 500’s Shiller P/E of 34 and the top 10 companies’ forward P/E of 25-27 rival or exceed 1929 levels, and investor behavior mirrors the speculative mania of the Roaring Twenties. Tariffs, like those in the 1920s, pose significant risks by increasing costs and straining global trade.[](https://www.gmo.com/americas/research-library/the-great-paradox-of-the-u.s.-market_viewpoints)[](https://www.businessinsider.com/stock-market-bubble-ai-dot-com-crash-sp500-tech-valuations-2025-7)[](https://en.wikipedia.org/wiki/Stock_market_crash)

However, differences exist: today’s leading companies are more fundamentally sound, and the Fed’s looser policy may delay a burst. While some analysts predict the bubble could inflate further (e.g., S&P 500 to 6,500), others warn of an imminent correction due to overvaluation and economic risks.[](https://finbold.com/guide/dot-com-bubble-crash/)[](https://www.usbank.com/investing/financial-perspectives/market-news/is-a-market-correction-coming.html)[](https://finance.yahoo.com/news/stocks-bubble-keep-inflating-until-233122429.html)

**Final Answer**: Yes, the 2025 stock market shows strong signs of a bubble similar to the 1920s, particularly in valuation, speculation, and tariff impacts. However, stronger corporate fundamentals and different monetary conditions suggest it may not collapse as severely or immediately as in 1929. Caution is warranted, as a correction or crash could be triggered by inflation, tariff fallout, or a shift in investor sentiment.
 
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#6
#6
@MontyPython

try asking grok how the current market is different from the 1920s bubble. you will get a far different answer.

people really need to learn that grok, or any AI, is not neutral. it is responding to your question and its pulling answers, almost randomly, from the internet as a whole. how often is wikipedia used? Doesn't mean the info is wrong, just saying its real easy to pull slanted info. the second most linked source "wsws" is the "world socialist web site" not exactly what anyone would call unbiased.

if you ask AI to prove something, it will find sources to prove it. if you ask the same AI model to disprove the same thing, it will.

like pretty much shortcut these tools are typically incapable at looking at the context around the information they are finding. they just regurgitate points closest to the question.

like this whole segment here: "**High P/E Ratios**: The S&P 500’s forward P/E ratio for the top 10 companies is around 25-27, higher than the 25 seen at the peak of the dot-com bubble in 2000, and approaching the 32.6 of 1929. Apollo’s chief economist, Torsten Sløk, notes that the top 10 S&P 500 firms are “more overvalued” than during the dot-com era, driven by AI-related stocks.[]" that 32.6 isn't some actual hard line. its just the historical P/E 6 years BEFORE the crash. when the market was far less regulated. this also misses the context that the P/E ratio has been far higher. this source has it over 100 for the 2008 crash, but also over 40 in 2002, and over the 32.6 in 2020.

www.macrotrends.net

S&P 500 PE Ratio - 90 Year Historical Chart

This interactive chart shows the trailing twelve month S&P 500 PE ratio or price-to-earnings ratio back to 1926.
www.macrotrends.net www.macrotrends.net


also its tough to dial it in, but that 32.6 P/E in the 20s didn't come right at or before the crash in 1929, it came in 1923.

overall the P/E has been steadily climbing, so trying to use it as a metric seems pretty flawed if you aren't actually going to take the context into consideration.
 
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#7
#7
LouderVol said:
@MontyPython

try asking grok how the current market is different from the 1920s bubble. you will get a far different answer.

people really need to learn that grok, or any AI, is not neutral. it is responding to your question and its pulling answers, almost randomly, from the internet as a whole. how often is wikipedia used? Doesn't mean the info is wrong, just saying its real easy to pull slanted info. the second most linked source "wsws" is the "world socialist web site" not exactly what anyone would call unbiased.

if you ask AI to prove something, it will find sources to prove it. if you ask the same AI model to disprove the same thing, it will.
Click to expand...

I'm thinking my question to Grok

Are we currently in a stock market bubble similar to the 1920s?

Is a pretty innocuous, neutral question.
 
#8
#8
MontyPython said:
I'm thinking my question to Grok

Are we currently in a stock market bubble similar to the 1920s?

Is a pretty innocuous, neutral question.
Click to expand...
you phrased it in a positive manner, "similar". its not a critical thinking tool, it responds to the cues you ask it, it doesn't go out there and mine for neutral information, it goes out and collects from sources than match the "tone" of the question.

ask it "is the current health of the stock market different than the 1920s?"

or just ask it to compare the stock market health from now and then.

you will get three different answers.
 
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#9
#9
I think it's a currency bubble. It would've unwound on it's own as other countries began to trade with each other directly without buying dollars, but the trump trade war will only increase the speed of the demise. I'd avoid anything that looks like a currency at this point. Gold was confiscated in the 30s when the dollar was devalued in the depression.
 
#10
#10
LouderVol said:
you phrased it in a positive manner, "similar". its not a critical thinking tool, it responds to the cues you ask it, it doesn't go out there and mine for neutral information, it goes out and collects from sources than match the "tone" of the question.

ask it "is the current health of the stock market different than the 1920s?"

or just ask it to compare the stock market health from now and then.

you will get three different answers.
Click to expand...
No that's fair, dude...

Let's try this one on for size:


Compare the risks of the stock market today compared to the 1920s.

Comparing the risks of the stock market in 2025 to the 1920s involves analyzing key factors like valuations, leverage, speculation, economic context, and systemic safeguards. The 1920s culminated in the 1929 crash, a defining bubble, while today’s market operates in a different regulatory and economic environment. Below is a detailed comparison based on available data, including insights from recent X posts and web sources, with a focus on clarity and brevity.

### 1. **Valuations**
- **1920s**: The S&P Composite P/E ratio hit 32.6 in September 1929, far above historical norms, signaling overvaluation. Stocks rose 120% from 1925–1929, driven by speculative exuberance.
- **2025**: Forward P/E ratios for the S&P 500 are reported at 27x, per X posts, surpassing the 2000 dot-com peak (25x) but below 1929’s peak. Market cap-to-GDP ratios are claimed to exceed 1929 (81%) and 2000 (136%), though these figures lack verification. Valuations are high, especially in tech/AI sectors, with 38% of S&P 500 market cap in 10 companies.
- **Risk Comparison**: Both periods show elevated valuations, but 2025’s are more sector-specific (tech) than the broad overvaluation of 1929. **Risk in 2025 is high but less pervasive than in the 1920s.**

### 2. **Leverage (Margin Debt)**
- **1920s**: Margin debt was 20% of NYSE market value by 1929, up from 12% in 1917. Loans reached $8.5 billion, exceeding U.S. currency in circulation, amplifying losses during the crash.
- **2025**: X posts suggest heavy borrowing for stock purchases, with margin debt at “bubble-like” levels, per CNBC. Exact figures are unavailable, but leverage is a concern, especially among retail investors.
- **Risk Comparison**: Both eras feature significant leverage, increasing vulnerability to corrections. However, 2025 benefits from stricter margin requirements and trading halts, reducing systemic risk compared to 1929. **Risk is elevated but moderated by regulations.**

### 3. **Speculative Behavior**
- **1920s**: Widespread public participation, including small investors, fueled a speculative frenzy. Closed-end funds traded at premiums, and margin buying was rampant.
- **2025**: Retail investor enthusiasm, amplified by social media and platforms like X, mirrors 1920s speculation but is driven by tech/AI hype, similar to the dot-com era. Options trading and meme stock activity add to speculative risks.
- **Risk Comparison**: Speculation is high in both periods, but 2025’s is concentrated in specific sectors and amplified by digital platforms. **Risk is comparable, though 2025’s speculation is less broad-based.**

### 4. **Economic Context**
- **1920s**: Strong real income growth (3.4% annually, 1923–1929) supported markets, but rising interest rates in 1929 and trade barriers (e.g., Smoot-Hawley Tariff Act) triggered economic distress post-crash.
- **2025**: Q2 2025 GDP grew at 3%, but Trump’s tariff policies raise concerns. Economists (98% in a 2024 survey) warn tariffs increase consumer prices and risk slowdown or recession, echoing 1920s trade policy risks.
- **Risk Comparison**: Both periods face trade-related risks, but 2025’s economy is supported by a proactive Federal Reserve and post-COVID resilience. **Risk is significant but less catastrophic due to modern policy tools.**

### 5. **Systemic Safeguards**
- **1920s**: Minimal regulation, no circuit breakers, and a passive Federal Reserve exacerbated the 1929 crash. Margin loans were loosely regulated, and bank failures amplified the downturn.
- **2025**: Post-1929 reforms (e.g., Glass-Steagall, SEC) and circuit breakers limit panic selling. The Federal Reserve’s role as a lender of last resort and modern banking regulations reduce systemic fragility.
- **Risk Comparison**: The 1920s lacked mechanisms to prevent or mitigate crashes, while 2025’s safeguards significantly lower the risk of a 1929-style collapse. **Risk is much lower due to regulatory advancements.**

### 6. **Market Concentration and External Shocks**
- **1920s**: The bubble was broad-based, affecting most sectors. External shocks like tightening monetary policy and trade barriers precipitated the crash.
- **2025**: Market gains are concentrated in tech/AI, making the broader market less vulnerable but exposing tech-heavy indices to corrections. Tariffs and geopolitical tensions (e.g., U.S.-China relations) pose external risks.
- **Risk Comparison**: 2025’s concentration in a few stocks increases sector-specific risk, but the broader market is less exposed than in 1929. External shocks like tariffs remain a shared concern. **Risk is more sector-specific in 2025.**

### Summary of Risks
- **Similarities**: High valuations, significant leverage, speculative behavior, and trade policy risks (tariffs) echo the 1920s, suggesting a frothy market vulnerable to corrections, particularly in overvalued sectors like tech.
- **Differences**: 2025 benefits from robust regulations, circuit breakers, and a proactive Federal Reserve, reducing the likelihood of a systemic collapse. The bubble, if present, is more akin to the 2000 dot-com era (sector-specific) than the 1920s (broad-based).


- **Overall Risk Assessment**: The stock market in 2025 carries notable risks due to high valuations, leverage, and tariff-related economic threats, but these are less severe than in the 1920s due to modern safeguards and a less pervasive bubble. A sharp correction is possible, especially in tech, but a 1929-style crash is unlikely absent major external shocks.
 
#11
#11
MontyPython said:
No that's fair, dude...

Let's try this one on for size:


Compare the risks of the stock market today compared to the 1920s.

Comparing the risks of the stock market in 2025 to the 1920s involves analyzing key factors like valuations, leverage, speculation, economic context, and systemic safeguards. The 1920s culminated in the 1929 crash, a defining bubble, while today’s market operates in a different regulatory and economic environment. Below is a detailed comparison based on available data, including insights from recent X posts and web sources, with a focus on clarity and brevity.

### 1. **Valuations**
- **1920s**: The S&P Composite P/E ratio hit 32.6 in September 1929, far above historical norms, signaling overvaluation. Stocks rose 120% from 1925–1929, driven by speculative exuberance.
- **2025**: Forward P/E ratios for the S&P 500 are reported at 27x, per X posts, surpassing the 2000 dot-com peak (25x) but below 1929’s peak. Market cap-to-GDP ratios are claimed to exceed 1929 (81%) and 2000 (136%), though these figures lack verification. Valuations are high, especially in tech/AI sectors, with 38% of S&P 500 market cap in 10 companies.
- **Risk Comparison**: Both periods show elevated valuations, but 2025’s are more sector-specific (tech) than the broad overvaluation of 1929. **Risk in 2025 is high but less pervasive than in the 1920s.**

### 2. **Leverage (Margin Debt)**
- **1920s**: Margin debt was 20% of NYSE market value by 1929, up from 12% in 1917. Loans reached $8.5 billion, exceeding U.S. currency in circulation, amplifying losses during the crash.
- **2025**: X posts suggest heavy borrowing for stock purchases, with margin debt at “bubble-like” levels, per CNBC. Exact figures are unavailable, but leverage is a concern, especially among retail investors.
- **Risk Comparison**: Both eras feature significant leverage, increasing vulnerability to corrections. However, 2025 benefits from stricter margin requirements and trading halts, reducing systemic risk compared to 1929. **Risk is elevated but moderated by regulations.**

### 3. **Speculative Behavior**
- **1920s**: Widespread public participation, including small investors, fueled a speculative frenzy. Closed-end funds traded at premiums, and margin buying was rampant.
- **2025**: Retail investor enthusiasm, amplified by social media and platforms like X, mirrors 1920s speculation but is driven by tech/AI hype, similar to the dot-com era. Options trading and meme stock activity add to speculative risks.
- **Risk Comparison**: Speculation is high in both periods, but 2025’s is concentrated in specific sectors and amplified by digital platforms. **Risk is comparable, though 2025’s speculation is less broad-based.**

### 4. **Economic Context**
- **1920s**: Strong real income growth (3.4% annually, 1923–1929) supported markets, but rising interest rates in 1929 and trade barriers (e.g., Smoot-Hawley Tariff Act) triggered economic distress post-crash.
- **2025**: Q2 2025 GDP grew at 3%, but Trump’s tariff policies raise concerns. Economists (98% in a 2024 survey) warn tariffs increase consumer prices and risk slowdown or recession, echoing 1920s trade policy risks.
- **Risk Comparison**: Both periods face trade-related risks, but 2025’s economy is supported by a proactive Federal Reserve and post-COVID resilience. **Risk is significant but less catastrophic due to modern policy tools.**

### 5. **Systemic Safeguards**
- **1920s**: Minimal regulation, no circuit breakers, and a passive Federal Reserve exacerbated the 1929 crash. Margin loans were loosely regulated, and bank failures amplified the downturn.
- **2025**: Post-1929 reforms (e.g., Glass-Steagall, SEC) and circuit breakers limit panic selling. The Federal Reserve’s role as a lender of last resort and modern banking regulations reduce systemic fragility.
- **Risk Comparison**: The 1920s lacked mechanisms to prevent or mitigate crashes, while 2025’s safeguards significantly lower the risk of a 1929-style collapse. **Risk is much lower due to regulatory advancements.**

### 6. **Market Concentration and External Shocks**
- **1920s**: The bubble was broad-based, affecting most sectors. External shocks like tightening monetary policy and trade barriers precipitated the crash.
- **2025**: Market gains are concentrated in tech/AI, making the broader market less vulnerable but exposing tech-heavy indices to corrections. Tariffs and geopolitical tensions (e.g., U.S.-China relations) pose external risks.
- **Risk Comparison**: 2025’s concentration in a few stocks increases sector-specific risk, but the broader market is less exposed than in 1929. External shocks like tariffs remain a shared concern. **Risk is more sector-specific in 2025.**

### Summary of Risks
- **Similarities**: High valuations, significant leverage, speculative behavior, and trade policy risks (tariffs) echo the 1920s, suggesting a frothy market vulnerable to corrections, particularly in overvalued sectors like tech.
- **Differences**: 2025 benefits from robust regulations, circuit breakers, and a proactive Federal Reserve, reducing the likelihood of a systemic collapse. The bubble, if present, is more akin to the 2000 dot-com era (sector-specific) than the 1920s (broad-based).


- **Overall Risk Assessment**: The stock market in 2025 carries notable risks due to high valuations, leverage, and tariff-related economic threats, but these are less severe than in the 1920s due to modern safeguards and a less pervasive bubble. A sharp correction is possible, especially in tech, but a 1929-style crash is unlikely absent major external shocks.
Click to expand...
I have already pointed out how some of this is false.

"Forward P/E ratios for the S&P 500 are reported at 27x, per X posts, surpassing the 2000 dot-com peak (25x) but below 1929’s peak" the peak in the 2000s reached into the 100s, I posted two sources on this.

I keep telling you, don't trust grok as a primary source. it can't tell fact from fiction.
 
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#13
#13
LouderVol said:
I have already pointed out how some of this is false.

"Forward P/E ratios for the S&P 500 are reported at 27x, per X posts, surpassing the 2000 dot-com peak (25x) but below 1929’s peak" the peak in the 2000s reached into the 100s, I posted two sources on this.

I keep telling you, don't trust grok as a primary source. it can't tell fact from fiction.
Click to expand...
I wouldn't be surprised to see schools (middle, high) incorporate classes on how to word interactions with AI, internet searches, etc. Just like I had computer classes starting in 6th grade.
 
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#14
#14
volfanhill said:
This thread is a perfect example of how the stock market is over valued. Tech stocks are grossly over valued. The only thing new they are peddaling is AI. Well what if AI isn't anywhere near what some of these folks claim it is?
Click to expand...
It seems like so far all it is is a fancy ass search engine. To wit: anything Monty posts lately
 
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#15
#15
volfanhill said:
This thread is a perfect example of how the stock market is over valued. Tech stocks are grossly over valued. The only thing new they are peddaling is AI. Well what if AI isn't anywhere near what some of these folks claim it is?
Click to expand...
are you pulling your investments from the market and/or changing the sectors you're invested in?
 
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#19
#19
MontyPython said:
Woke up this morning thinking about how well the stock market has been performing... for years. Then thought more about Trump's tariffs and how this echos the 1920s... how we similarly had a historically-bad Republican businessman (Hoover) as our President, how we had nearly identical epidemics in prior years, and how all of this seems to mirror the 1920s right here and now. Wanted an 'objective opinion' on it all, so asked Grok for an AI view on where we stand. I asked Grok:

Are we currently in a stock market bubble similar to the 1920s?

Response:

To assess whether the U.S. stock market in 2025 is in a bubble similar to the one in the 1920s, we need to compare key characteristics of the 1920s bubble with current market conditions, drawing on available data and historical parallels. Below, I’ll analyze the similarities and differences, focusing on valuation metrics, investor behavior, economic context, and external factors like tariffs, while incorporating relevant insights from recent sources.

---

### **Characteristics of the 1920s Stock Market Bubble**
The 1920s stock market bubble, culminating in the 1929 crash, had several defining features:

1. **Speculative Frenzy and Overvaluation**:
- The Dow Jones Industrial Average rose dramatically, peaking at 381 points in September 1929, driven by widespread speculation.[](https://www.britannica.com/event/stock-market-crash-of-1929)
- The average price-to-earnings (P/E) ratio of S&P Composite stocks reached 32.6 in September 1929, well above historical norms.[](https://en.wikipedia.org/wiki/Wall_Street_crash_of_1929)
- Investors, from magnates to ordinary citizens, poured money into stocks, often using margin debt (borrowing up to two-thirds of stock value). Over $8.5 billion was loaned for stock purchases, exceeding the U.S. currency supply at the time.[](https://en.wikipedia.org/wiki/Wall_Street_crash_of_1929)

2. **Technological Optimism**:
- The bubble was fueled by excitement over new technologies like radio, automobiles, and electrical power grids, leading to overinvestment in related stocks.[](https://en.wikipedia.org/wiki/Stock_market_bubble)

3. **Economic Context**:
- The "Roaring Twenties" saw strong economic growth, low unemployment, and industrial expansion, creating a sense of boundless optimism.[](https://www.investopedia.com/ask/answers/042115/what-caused-stock-market-crash-1929-preceded-great-depression.asp)
- However, underlying issues included overleveraged investors, loose credit, and economic imbalances, such as declining agricultural exports due to tariffs like the Fordney-McCumber Tariff of 1922.[](https://en.wikipedia.org/wiki/Wall_Street_crash_of_1929)

4. **Tariff Policies**:
- The Fordney-McCumber Tariff raised duties on imports, protecting domestic industries but prompting retaliatory tariffs from trading partners. This reduced U.S. exports, particularly in agriculture, and strained global trade, contributing to economic vulnerabilities.[](https://en.wikipedia.org/wiki/Wall_Street_crash_of_1929)

5. **Crash Trigger**:
- The bubble burst in October 1929, with the Dow dropping 25% over four days (Black Thursday to Black Tuesday), exacerbated by panic selling and margin calls. The crash marked the start of the Great Depression, though debates persist on whether it caused or merely coincided with it.[](https://www.britannica.com/event/stock-market-crash-of-1929)[](https://en.wikipedia.org/wiki/Wall_Street_crash_of_1929)

---

### **Current Market Conditions (2025)**
Now, let’s examine the 2025 stock market, focusing on whether it exhibits bubble-like characteristics similar to the 1920s.

1. **Valuation Metrics**:
- **High P/E Ratios**: The S&P 500’s forward P/E ratio for the top 10 companies is around 25-27, higher than the 25 seen at the peak of the dot-com bubble in 2000, and approaching the 32.6 of 1929. Apollo’s chief economist, Torsten Sløk, notes that the top 10 S&P 500 firms are “more overvalued” than during the dot-com era, driven by AI-related stocks.[](https://www.businessinsider.com/stock-market-bubble-ai-dot-com-crash-sp500-tech-valuations-2025-7)[](https://finbold.com/guide/dot-com-bubble-crash/)
- **Market Concentration**: The “Magnificent Seven” (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, Tesla) account for 32-33% of the S&P 500’s market capitalization, double their share five years ago. This concentration mirrors the 1920s, where certain sectors dominated market gains.[](https://www.oaktreecapital.com/insights/memo/on-bubble-watch)
- **Shiller P/E**: The Shiller P/E ratio for the S&P 500 is around 34 in 2025, a level only seen before major bubbles like 1929 and 1998-2000, signaling overvaluation.[](https://www.gmo.com/americas/research-library/the-great-paradox-of-the-u.s.-market_viewpoints)

- **Conclusion**: Current valuations are elevated, similar to or exceeding those of past bubbles, including the 1920s, suggesting potential overpricing.

2. **Investor Behavior and Speculation**:
- **Margin Debt**: Investors are borrowing heavily to buy stocks, with margin debt levels in 2025 reportedly at paces last seen during previous bubbles. This echoes the 1920s, where margin loans fueled speculative buying.[](https://en.wikipedia.org/wiki/Wall_Street_crash_of_1929)
- **Speculative Hype**: The AI boom has driven enthusiasm for tech stocks, with companies adding “AI” to their branding to attract investors, reminiscent of the 1920s’ excitement over new technologies or the dot-com era’s “.com” frenzy.[](https://www.nasdaq.com/articles/6-stock-market-lessons-dot-com-bubble-apply-2025)
- **Bullish Sentiment**: Bank of America reports asset managers’ exposure to the S&P 500 at a 20-year high, fueled by expectations of deregulation, tax cuts, and AI growth. This optimism parallels the “Hoover bull market” of 1929.[](https://www.wsws.org/en/articles/2025/01/06/wrfd-j06.html)[](https://www.britannica.com/event/stock-market-crash-of-1929)

- **Conclusion**: Investor behavior shows signs of “irrational exuberance,” with heavy leverage and speculative focus on AI, closely resembling the 1920s’ speculative fervor.

3. **Economic Context**:
- **Growth and Optimism**: The U.S. economy has shown resilience, with solid growth and corporate earnings driving the S&P 500 to record highs in mid-2025, despite volatility in April. This mirrors the Roaring Twenties’ economic boom.[](https://www.usbank.com/investing/financial-perspectives/market-news/is-a-market-correction-coming.html)
- **Underlying Risks**: Concerns exist about weakening consumer spending, a stagnant housing market, and limited business investment outside AI. Global economic weakness, particularly in China, the EU, and Japan, could impact the U.S. These risks echo the 1920s’ economic imbalances, like agricultural export declines.[](https://www.wsws.org/en/articles/2025/01/06/wrfd-j06.html)
- **Monetary Policy**: The Federal Reserve cut rates three times in 2024, bringing the federal funds rate to 4.25-4.50%, with only two more cuts projected for 2025. In contrast, the Fed raised rates in 1929, tightening credit before the crash. Current looser policy may fuel the bubble, unlike the 1920s’ tightening.[](https://www.usbank.com/investing/financial-perspectives/market-news/is-a-market-correction-coming.html)[](https://www.britannica.com/event/stock-market-crash-of-1929)

- **Conclusion**: While economic growth supports market gains, vulnerabilities like consumer weakness and global slowdowns resemble the 1920s’ pre-crash imbalances.

4. **Tariff Policies**:
- **2025 Tariffs**: President Trump’s “Liberation Day” tariffs, announced on March 21, 2025, imposed 10% universal tariffs on imports (excluding pharmaceuticals, semiconductors, and lumber), with higher tariffs on specific countries (e.g., 34% on China, 20% on the EU). These led to a market crash on April 2, 2025, with the Dow losing 1,344.50 points (3.22%) and the S&P 500 losing 176.96 points (3.15%), wiping out over $3 trillion in market value.[](https://en.wikipedia.org/wiki/Stock_market_crash)
- **Comparison to 1920s**: The Fordney-McCumber Tariff similarly disrupted trade, prompting retaliatory tariffs and hurting U.S. exporters, particularly farmers. The 2025 tariffs have raised inflation concerns, potentially limiting Fed rate cuts, and companies like Stanley Black & Decker report hundreds of millions in costs.[](https://www.wsws.org/en/articles/2025/01/06/wrfd-j06.html)
- **Impact**: Like the 1920s, current tariffs risk global trade tensions and economic strain, potentially exacerbating bubble conditions by increasing costs and reducing exports.

- **Conclusion**: The 2025 tariffs mirror the 1920s’ protectionist policies, with similar potential to destabilize markets and amplify economic risks.

5. **Bubble Warnings**:
- Analysts like Torsten Sløk and Jeremy Grantham warn of a bubble, particularly in AI stocks, with valuations exceeding dot-com peaks. Bank of America notes the market’s 40% rise over two years (2023-2024) is driven by AI hype and policy expectations, but high concentration risks lower long-term returns.[](https://www.businessinsider.com/stock-market-bubble-ai-dot-com-crash-sp500-tech-valuations-2025-7)[](https://www.gmo.com/americas/research-library/the-great-paradox-of-the-u.s.-market_viewpoints)[](https://www.wsws.org/en/articles/2025/01/06/wrfd-j06.html)
- Some, like Capital Economics, predict the S&P 500 could hit 6,500 by the end of 2025, a 30% rise, implying the bubble may continue inflating.[](https://finance.yahoo.com/news/stocks-bubble-keep-inflating-until-233122429.html)

- **Conclusion**: Expert warnings and historical parallels suggest a bubble, though its trajectory (continued inflation or imminent burst) remains uncertain.

---

### **Key Similarities**

- **Overvaluation**: Both periods show elevated P/E ratios (32.6 in 1929 vs. ~27 in 2025 for top firms), with market concentration in a few dominant stocks.[](https://en.wikipedia.org/wiki/Wall_Street_crash_of_1929)[](https://www.businessinsider.com/stock-market-bubble-ai-dot-com-crash-sp500-tech-valuations-2025-7)
- **Speculative Behavior**: Heavy margin debt and enthusiasm for new technologies (radio/automobiles in the 1920s, AI in 2025) drive speculative buying.[](https://en.wikipedia.org/wiki/Wall_Street_crash_of_1929)
- **Tariff Disruptions**: Protectionist tariffs in both eras (Fordney-McCumber in 1922, Trump’s tariffs in 2025) strain global trade and raise inflation risks, potentially destabilizing markets.[](https://en.wikipedia.org/wiki/Stock_market_crash)
- **Economic Optimism with Risks**: Both periods feature strong growth but underlying vulnerabilities, like trade disruptions and overleveraged investors.[](https://www.investopedia.com/ask/answers/042115/what-caused-stock-market-crash-1929-preceded-great-depression.asp)

---

### **Key Differences**

- **Company Fundamentals**: Unlike many 1920s or dot-com companies, today’s leading AI firms (e.g., Nvidia, Microsoft) are profitable with established revenue streams, though smaller AI companies may be overhyped.[](https://finbold.com/guide/dot-com-bubble-crash/)
- **Monetary Policy**: The Fed tightened policy in 1929, contributing to the crash, while 2025 sees a more accommodative stance, potentially prolonging the bubble.[](https://www.usbank.com/investing/financial-perspectives/market-news/is-a-market-correction-coming.html)[](https://www.britannica.com/event/stock-market-crash-of-1929)
- **Speed of Recovery**: The 2025 market recovered quickly from the April crash, unlike the prolonged decline post-1929, suggesting different dynamics.[](https://en.wikipedia.org/wiki/Stock_market_crash)
- **Global Context**: The 1920s bubble was U.S.-centric, while 2025 faces global economic weakness (e.g., China, EU), which could amplify risks or limit bubble growth.[](https://www.wsws.org/en/articles/2025/01/06/wrfd-j06.html)

---

### **Conclusion**

The U.S. stock market in 2025 exhibits several bubble-like characteristics similar to the 1920s: high valuations, speculative fervor driven by AI, heavy margin debt, and tariff-induced trade disruptions. The S&P 500’s Shiller P/E of 34 and the top 10 companies’ forward P/E of 25-27 rival or exceed 1929 levels, and investor behavior mirrors the speculative mania of the Roaring Twenties. Tariffs, like those in the 1920s, pose significant risks by increasing costs and straining global trade.[](https://www.gmo.com/americas/research-library/the-great-paradox-of-the-u.s.-market_viewpoints)[](https://www.businessinsider.com/stock-market-bubble-ai-dot-com-crash-sp500-tech-valuations-2025-7)[](https://en.wikipedia.org/wiki/Stock_market_crash)

However, differences exist: today’s leading companies are more fundamentally sound, and the Fed’s looser policy may delay a burst. While some analysts predict the bubble could inflate further (e.g., S&P 500 to 6,500), others warn of an imminent correction due to overvaluation and economic risks.[](https://finbold.com/guide/dot-com-bubble-crash/)[](https://www.usbank.com/investing/financial-perspectives/market-news/is-a-market-correction-coming.html)[](https://finance.yahoo.com/news/stocks-bubble-keep-inflating-until-233122429.html)

**Final Answer**: Yes, the 2025 stock market shows strong signs of a bubble similar to the 1920s, particularly in valuation, speculation, and tariff impacts. However, stronger corporate fundamentals and different monetary conditions suggest it may not collapse as severely or immediately as in 1929. Caution is warranted, as a correction or crash could be triggered by inflation, tariff fallout, or a shift in investor sentiment.
Click to expand...
You lost me at “I asked Grock”.

If you don’t understand the issues in question fully enough to compose your own rational and coherent summary, I am not going to waste 15 minutes of my day reading your (excuse me, Grok’s) rambling missive.

Be honest, did you even read all that yourself or did you just cut and paste?

(full disclosure, I used to do the same thing but am now embarrassed by my own laziness in doing so)
 
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#23
#23
hog88 said:
Sadly too many people are substituting AI for the brains these days.
Click to expand...
Skynet has to start somewhere.

Saw the other day where they were testing an AI therapy tool the other day and it was telling some test patients to kill themselves

The ultimate irony is that people in one breath complain about secret government and corporate conspiracies to control our behavior, and them immediately ask a mysterious computer algorithm under the control of the world’s most powerful companies for advice
 
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