The global financial market has been volatile since Trump asked for tariffs on steel and aluminium imports; in addition, when Trump announced the new chairman for the US Fed, there was also volatility in the global financial market. On the other hand, during the past several years, the global stock market was enjoying very strong growth, especially the US market. When there is volatile in the market, many people look back and re-judge their valuations and opinions about the stock market.
Bitcoin is another asset that has attracted lots of heat, its value has increased significantly. Many tech companies, including Google's parent, Alphabet, Amazon, have increased incredibly in terms of their capital values. When we look back, we start to question how sensible these price increases were. In addition, the US Fed and other central banks have publicly spoken about rate hikes in the near future. The 2007-2008 financial crisis was started by the rate hike. So are we heading into another crisis?
There are some hedge funds that short some European firms that make profits largely in the US because they think the possibility of American tariff increase, which is happening, will weaken these companies' profitability. However, that does not necessarily mean most of the institutions believe there is a crisis ahead. During the dotcom bubble, the average of P/E ratios was 90, which was a lot higher than the current average ratio (although the P/E ratio for Amazon is over 200). Moreover, although the prices in general increased significantly over the last year, the price change was much more moderate than the period just before the dotcom bubble bursts that a company stock price generally increased based on fundamental positive information (news).
Although there definitely is some degree of overreaction and over-optimism in the market, even if the bubble bursts right now, it cannot be as bad as the dotcom bubble as the bubble is highly likely to be much smaller than the dotcom bubble.
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