It's getting frothy out there, again

Politico

6 days ago

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QUICK FIX
Wall Street is awash with bubble concerns. Get used to it.
Four months after President Donald Trump's 'Liberation Day' sent investors spiraling over his tariff plans, the markets have roared back to new all-time highs.
It's a stunning turnaround that has reaffirmed the administration's belief that investors appreciate Trump's grand plans to remake global trade, as our Sam Sutton and Victoria Guida wrote last week. Yet, underneath the sea of green returns, there are concerns that individual investors are once again getting out ahead of their skis in buying up risky assets.
'People have become increasingly more emboldened to take bigger and bigger risks,' Interactive Brokers Chief Strategist Steve Sosnick said. 'When risk-taking works out really well, you're sort of psychologically incentivized to take it.'
From new-age meme stocks to the reemergence of blank-check entities to companies buying up cryptocurrency tokens, individual investors just can't seem to get enough of risk. And for now, the push is at least offering them the chance for steep gains.
Shares in new-age meme stocks like GoPro, Krispy Kreme and Kohl's have soared this year at times, thanks to the same types of way-too-online investors who sent the OG meme stocks (GameStop, AMC Entertainment and Bed Bath & Beyond) higher in 2021. Blank-check companies, better known as SPACs, or special purpose acquisition companies, are back in vogue. And companies big and small are buying up bitcoin and other tokens left and right, a trend that has already been stoking concern for months despite its tendency to juice those companies' stock prices.
Bubble concerns are nothing new in 2025. In the months following Election Day, investors bid up just about everything and anything in the hope that Trump would accelerate growth across corporate America and foster newer industries such as crypto. But the market's rise set off a wave of warnings from Wall Street veterans including JPMorgan Chase CEO Jamie Dimon and hedge fund billionaire Paul Tudor Jones that assets were far too hot — and sure enough, most everything came tumbling down in April.
Now, some traders and economists are reviving their warnings.
'In 2020, I suggested that this decade could turn out to be the roaring 2020s, and that's the way it's going. It could get frothier,' said Ed Yardeni, president of Yardeni Research. The market's rise, he added, doesn't have to end as badly as the 1920s did. But a significant correction or bear market is certainly possible, he said.
'Here we are in record time at all-time highs, and everybody's already forgetting how miserable they felt when the stock market was taking a dive' earlier this year, Yardeni said.
Of course, despite the lingering questions about Trump's tariffs and the Federal Reserve's next moves, the broader economy is chugging along nicely, as the Commerce Department's initial gross domestic product estimate for the second quarter showed. (And as any good market-watcher knows, the markets are not the economy.)
Ritholtz Wealth Management CEO Josh Brown said in a recent interview that there are always signs of silliness in a bull market, and that, right now, 'it's really tough to be on the sidelines watching this thing run away.'
And yet, all good things must also come to an end — eventually. Rich Bernstein, who leads the investment management firm Richard Bernstein Advisors LLC, said the current market shares many similarities with the dot-com bubble of the late 1990s, including the emphasis among executives and investors in growing new technologies, a new financial system and new products.
'It's a new era — and that very often accompanies bubbles, too,' he said.
It's THURSDAY — And the MLB trade deadline has finally arrived. Here's to hoping the Cubs can pull something off. Send me your SEC, CFTC and Wall Street thoughts to [e-mail]. And as always, you can direct your MM tips and pitches to Sam at [e-mail].
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Driving the day
Commerce will release its June report on the personal consumption expenditures index at 8:30 a.m. … Senate Finance holds a hearing on the nominations of Bryan Switzer to be a deputy U.S. Trade Representative for Asia, textiles, investment, services and intellectual property; Gustav Chiarello III to be assistant HHS secretary for financial resources; Michael Stuart to be HHS general counsel; and Derek Theurer to be deputy Treasury undersecretary for legislative affairs.
Some good news for Trump — The Federal Reserve held interest rates steady Wednesday as expected, but the announcement wasn't all bad news for President Donald Trump, who has been on a fierce pressure campaign to convince the central bank to slash borrowing costs. As Victoria reports, Fed board members Christopher Waller and Michelle Bowman dissented on the decision and made clear that they believed rates should have been cut — a rare move that indicates 'opinion within the central bank is starting to shift [Trump's] way.'
— To be clear, this doesn't happen often. From Victoria: 'While the Fed's regional branch heads sometimes dissent from monetary policy moves, it's much more unusual for one of the seven board members to do so, let alone two of them — an outcome that hadn't happened since 1993.
— Yes, but… Fed Chair Jerome Powell isn't signaling much about the central bank's future plans. He told reporters, when asked about the possibility of a rate cut, that the Fed has 'made no decisions about September,' per Victoria.
The Winklevii have thoughts on CFTC chair — Your host and Sophia Cai scooped late yesterday that crypto billionaires Tyler and Cameron Winklevoss — yes, those same Harvard-educated twins of Facebook fame — pressed Trump in a call this past weekend to reconsider his pick to run the small-but-powerful Commodity Futures Trading Commission, Brian Quintenz. The twins told the president that they do not believe Quintenz, a former Wall Street regulator, aligns with Trump's agenda, according to one person familiar with the conversation.
— Their call came just before the Senate Agriculture Committee was scheduled to vote Monday on advancing Quintenz's nomination. The panel mysteriously scrapped the vote just before it was set to kick off, sending lobbyists, CFTC officials and lawmakers scrambling to figure out what happened.
— The White House is backing Quintenz: 'Brian Quintenz remains President Trump's nominee to serve as chairman of the CFTC,' White House spokesperson Liz Huston said in a statement. 'He will help execute President Trump's mission of making America the crypto capital of the world, and we look forward to his swift confirmation.'
ICYMI: The White House has crypto thoughts — In a landmark report, the Trump administration laid out a series of recommendations 'aimed at promoting cryptocurrency markets, the latest sign of Trump's embrace of the once politically outcast industry,' your host reports.
Trade
So what if you didn't do a deal? — That's the conundrum facing several countries, including some of the U.S.'s biggest trading partners, that have yet to strike a new trade agreement with Trump before his Friday deadline. As Daniel Desrochers, Eli Stokols, Phelim Kine and Ari Hawkins report, Trump is planning to sign new executive orders Thursday that would lift the tariff rates on those countries. And that, they write, has 'sent their leaders, as well as officials from other sizable economies scrambling to try and secure a last-minute deal or extension — although most are downbeat about that prospect.'
— More tariff news: Trump on Wednesday set a 50 percent tariff on semi-finished copper imports, per our Doug Palmer. And Daniel reports that he also imposed a 50 percent tariff on Brazilian goods, 'following through with his threat to punish the country over several political disputes.'
At the regulators
FIRST IN MM: Warren, Dems press OCC on Trump stablecoin ties — Sen. Elizabeth Warren (D-Mass.) and two Democratic colleagues are pressing the nation's new top stablecoin regulator over how to manage potential conflicts of interest tied to President Donald Trump's family crypto ventures.
In a letter to newly confirmed Comptroller of the Currency Jonathan Gould, the senators questioned how the OCC would respond to potential pressure from Trump as the agency begins overseeing the stablecoin market — where the Trump family business is now a player with its own stablecoin.
Gould is in the early stages of implementing the new stablecoin regulatory regime created under the GENIUS Act, which Trump signed into law earlier this month. The legislation gives the OCC expanded oversight of nonbank stablecoin issuers. Michael Stratford has the full story.
'Privatizing Social Security' — 'Treasury Secretary Scott Bessent on Wednesday framed the president's new 'Trump accounts' as a transformative tool for long-term wealth building and a 'backdoor for privatizing Social Security,' Michael reports.
The Economy
About that GDP report — While the GDP reading Wednesday was undeniably a win for the administration, 'Commerce's report also showed signs of strain that could weigh on economic activity' and even affect the Fed's path toward lowering rates, Sam reports.
— 'While consumer spending accelerated from the first quarter, the 1.4 percent rate of growth reported in the April-June period represents a slowdown from what was reported throughout most of President Joe Biden's administration. U.S. exports fell over the previous three months, particularly within the auto sector. And real final sales to private domestic purchasers — which reflect consumer spending and private investment — increased 1.2 percent in the quarter, a slowdown from the previous three months. White House officials had pointed to that metric as a sign of strength after the first-quarter GDP numbers proved disappointing.'
Bigggg drop-off — Jed Kolko, former Commerce undersecretary for economic affairs who's now a senior fellow at the Peterson Institute for International Economics, has a new paper on what job growth could look like in the near future. The breakeven rate — the amount of monthly payroll growth needed to keep pace with the labor force — has fallen by nearly half since early last year. Per Kolko: 'With slower population growth, any given level of monthly payroll growth, consumption growth, or output growth reflects a stronger economy than it did a year ago.'
Wall Street
Square that — Charles Schwab's Q3 2025 Trader Sentiment Survey found that 57 percent of traders now have a positive market outlook, double the results of the Q2 survey. By the same token, the same percentage of those surveyed also believe the market is currently overvalued — and less than a quarter said they have a high degree of conviction in their three-month outlook.
Jobs report
Breyon Williams has joined Groundwork Collaborative as its new chief economist. Williams, who holds a Ph.D. in economics from the University of South Carolina, was previously a researcher at Mathematica and also has been a lecturer at American University.