Let’s tuck the Budget question to one side for the moment. As I mentioned in my last post, reacting to rumour is rarely a winning strategy. None of us knows exactly what Rachel Reeves has up her sleeve, and guessing tends to create more headaches than clarity. We’ll digest it properly once the facts land.
So, bubble chat it is.
Are we in a bubble?
Short answer: I don’t know. (If I did, I’d currently be somewhere sunny with a cocktail in hand.)
A bubble happens when prices rocket far beyond the underlying reality — earnings, profits, cashflow… you know, boring-but-important business fundamentals. The classic comparison right now is the late-90s tech frenzy, when companies had little more than a logo, website and a eye-watering valuation. (Google Pets.com).
Back then, price-to-earnings ratios hit the stratosphere. Microsoft traded at around 70x earnings at the peak. Today? More like themid-30s. Still high, but nowhere near dot-com-era bonkers — and importantly, many of today’s tech giants are actually making money and running proven businesses, not burning cash and hoping.
Is it a simple call? Definitely not.
And if it is a bubble?
Even if markets are fizzing more than usual, it doesn’t automatically mean a dramatic pop is around the corner. Markets can stay “expensive” for ages. The biggest risk for long-term investors isn’t the dip —it’s the temptation to jump out.
Why jumping in and out rarely works
The classic thought process is:
“I’ll move to cash now, wait for the fall, then hop back in at the bottom.”
Lovely idea. In practice? It’s like trying to ring a bell at the top and bottom of the market — only obvious after it’s happened, and by then it’s too late.
Two problems:
Just look back to the wobble around Liberation Day in April— markets dipped, then promptly bounced higher than before. Anyone who panicked lost out.
Bottom line
Yes, there’ll be a correction at some point — there always is. But history strongly suggests that staying invested through the noise beats trying to play crystal-ball investor.
If this is a bubble, enjoy the ride, knowing that pull backs are perfectly normal. Markets have a habit of dusting themselves off and then heading to new highs — and patient investors are usually the ones rewarded.
