Are We in a Bubble? (Or Just Blowing Hot Air?)

Last week, we pointed out that the US stock market is starting to look a little... top-heavy. A few tech giants have been doing most of the heavy lifting, while the rest of the market sits quietly in the corner, sipping its coffee and pretending everything’s fine.

Apparently, we’re not the only ones who’ve noticed. The word “bubble” has been floating around more than a helium balloon at a toddler’s birthday party.

So, let’s talk about it. Are we in one? And if so, is it the kind that bursts or the kind that builds something lasting?

Bubbles, Beanie Babies, and Bezos (Oh My!)

Recently, Jeff Bezos, the man who brought you two-day delivery and 24-hour regret purchases, had some thoughts on bubbles. He made an interesting distinction between two types:

1. Financial bubbles - the bad kind.

2. Industrial bubbles - the messy-but-productive kind.

Financial bubbles are your classic cautionary tales. Tulips in the 1600s. Beanie Babies in the 1990s. NFTs in... well, last Tuesday.

Everyone gets excited, piles in, and suddenly there’s more money chasing hype than logic. Then pop. Someone’s left holding a wilted flower, a plush toy, or a pixelated picture of a monkey wearing sunglasses.

Industrial bubbles, though, are a little different. They’re still built on hype, sure, but they leave something useful behind.

The Railroad Bubble: The Original Dot Com Boom

In the late 1800s, the US couldn’t get enough of railroads. Six percent of the entire economy went into building track - that’s a lot of steel, sweat, and “can we really afford this?” conversations.

The bubble eventually burst, taking a third of railway companies with it. But here’s the thing: the tracks stayed. The infrastructure remained.

And when the dust settled, those tracks became the foundation for massive new industries. One company, Sears Roebuck, used this shiny new transport network to ship catalogues and goods across the country. It revolutionised retail.

Sound familiar?

Fast forward a century, and after the dot-com crash, all that internet infrastructure stuck around too. And guess who built the next retail empire on top of it? Bezos himself.

(You see where this is going.)

The AI Bubble: Version 3.0

Now, we’re seeing similar excitement around artificial intelligence. Everyone wants a piece of the AI action - companies, investors, and even that one uncle who still forwards you stock tips from Facebook.

Yes, there’s hype. Yes, there’s risk. But like the railways and the internet, the infrastructure being built today could power the next generation of innovation.

AI data centres currently make up about 1% of the US economy, far from railroad levels, so we might still be in the “laying track” phase. There will be winners, there will be losers, and there will definitely be headlines screaming “The Bubble Has Burst!”

But if history teaches us anything, it’s that some bubbles don’t just pop, they build.

So, What Does It Mean for Investors?

At Cleveden Park Wealth, we believe in a grounded approach to investing, one that recognises opportunity without chasing hype.

Bubbles, whether financial or industrial, remind us why diversification, long-term thinking, and emotional discipline matter. The goal isn’t to avoid risk altogether but it’s to understand where it makes sense.

So, while the market chatters about AI mania and tech valuations, we’ll keep our feet firmly on the ground (and maybe just a little champagne ready - in case the good kind of bubble forms).

Final Thoughts (and One Small Disclaimer)

Predicting bubbles is easy in hindsight and impossible in real time. So instead of guessing when one might burst, we focus on helping clients build portfolios that can weather the ups, the downs, and the occasional puff of hot air.

If you’d like to discuss how to invest wisely amid the noise, our team is here to help.

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