tadamichi
Originally published on June 23, 2025
Sir Isaac Newton famously said of the stock market that he could calculate the motion of the heavenly bodies, but not the madness of people. We have to wonder what he might have made
The Stock Market's Irrational Exuberance
Summary
- Today’s stock market valuations are close to the record levels that prevailed shortly before the bursting of the dot.com bubble in 2000.
- The market seems to be discounting the possibility that Iran might block the Straits of Hormuz. It also seems to have escaped the market’s notice that relations between the US and China appear to be at a low point.
- The stock market’s seeming indifference to all of these troubling developments is all the more surprising considering the recent strange behavior of the 10-year Treasury bond market and of the dollar.
Desmond Lachman joined AEI after serving as a managing director and chief emerging market economic strategist at Salomon Smith Barney. He previously served as deputy director in the International Monetary Fund's (IMF) Policy Development and Review Department and was active in staff formulation of IMF policies. Mr. Lachman has written extensively on the global economic crisis, the U.S. housing market bust, the U.S. dollar, and the strains in the euro area. At AEI, Mr. Lachman is focused on the global macroeconomy, global currency issues, and the multilateral lending agencies.