Published: December 3, 2025
On December 3, 2025, the question hanging over global markets is not whether bubbles exist, but where they are and when they might finally pop.
A widely discussed article from The Economist (republished by Mint) lays out a new playbook for spotting a bubble’s breaking point, arguing that traditional valuation metrics are poor timing tools and that you should instead watch search-engine spikes and career pressure on fund managers. [1]
At the same time, today’s headlines are full of bubble-flavoured stories:
- AI darling Anthropic is preparing for a potential IPO at a valuation north of $300 billion, even as central bankers warn that excess liquidity is inflating risky assets. [2]
- Analysts are openly debating whether an “AI bubble” is forming, with Bank of America’s survey of global fund managers flagging AI overvaluation as the top risk for markets. [3]
- Housing experts are split between forecasts of a 50% price crash and gentler “buyer-friendly” corrections in overheated U.S. cities. [4]
Put simply: the theory of bubbles and the news of the day are colliding. Here’s how to connect them.
1. What a Market Bubble Really Is (and Isn’t)
A market bubble isn’t just “prices are high.” It’s a feedback loop:
- Story – A convincing narrative (“AI will remake everything,” “housing never falls nationally,” “crypto is the future of money”) captures imagination.
- Capital – Cheap money and strong risk appetite flood into the theme.
- Reflexivity – Rising prices validate the story, attracting more buyers and media attention.
- Overreach – Fundamentals lag wildly behind valuations; optimism turns to euphoria.
- Trigger – A disappointment, policy shift or simple exhaustion flips sentiment; liquidity disappears and prices gap lower.
The Economist’s key point: almost everyone can see step 4, but almost no one can time step 5. Even legendary investors like Ray Dalio, Peter Lynch, Howard Marks and George Soros spotted the 1990s dot‑com bubble years early, yet paid a heavy price for fighting it too soon. [5]
So the real game is not “call the top perfectly,” but “recognise late‑stage bubble behaviour and adjust risk before the damage is permanent.”
2. The Economist’s New Playbook for Spotting a Bubble Bursting
2.1 Valuations Tell You If It’s a Bubble – Not When It Pops
Using the Shiller CAPE ratio, The Economist shows that high valuations are quite good at predicting low 10‑year returns, but essentially useless for predicting what happens over the next 12 months. [6]
Interactive Brokers strategist Steve Sosnick, summarising the article, notes that:
- CAPE has a strong inverse correlation with long‑run equity returns (the higher the starting valuation, the lower the decade-ahead return).
- On a one‑year horizon, the relationship almost vanishes. [7]
In other words, sky‑high price/earnings or price/sales multiples tell you that future returns are likely to disappoint, but they don’t tell you whether the party ends this quarter or in three years.
2.2 Google Searches and Crowd Attention as a Timing Signal
Because valuations are such blunt instruments, the article explores an alternative: internet search data.
Looking at past manias — Bitcoin, Dogecoin, cannabis stocks, SPACs, ARKK and GameStop — the authors find that spikes in Google searches for a hot theme often coincided with, or slightly preceded, local price peaks. [8]
Sosnick condenses the finding like this:
When searches for terms like “ARKK”, “Bitcoin”, “GME” and “SPAC” spiked, those often coincided with peaks in those investments. [9]
Is this a rigorous, predictive model? No. The article itself warns that there are plenty of false positives and that search data won’t always call a crash. [10]
But as an investor, a parabolic spike in online curiosity is a strong hint that late‑stage retail money is piling in — the classic “shoeshine boy giving stock tips” moment, updated for the Google era.
2.3 Watch Career Risk: When Cautious Fund Managers Get Fired
Another subtle sign: who is being rewarded (or fired) in the professional investing world.
In the late 1990s, the dot-com boom punished cautious managers who avoided frothy stocks; some lost clients or their jobs before being vindicated by the 2000‑02 crash. [11]
When underweighting the hot theme becomes a career risk — and when the only “safe” move is to join the crowd — you’re probably closer to the end of the bubble than the beginning.
3. Today’s Flashing Red Lights: AI Bubble Fears in Focus
If you apply that playbook to the newsflow on December 3, 2025, AI‑related assets are the obvious place to look.
3.1 Anthropic’s Mega‑Valuation: A Live Stress Test
Anthropic, the company behind the Claude AI models, is laying the groundwork for an IPO as early as 2026, hiring top Silicon Valley counsel and raising new funding that could value the firm well above $300 billion. [12]
A Fortune report describes how this comes despite central‑bank warnings that “excess liquidity is blowing a bubble in the markets,” with the Bank of England flagging that risky asset valuations, particularly for technology companies, are “materially stretched.” [13]
A Benzinga‑syndicated analysis puts it bluntly: Anthropic’s IPO would be a market‑wide “diagnostic” of whether AI valuations are justified or simply the latest incarnation of tech euphoria. [14]
This is textbook late‑cycle behaviour:
- IPO pipeline filling at nosebleed valuations.
- Central banks openly warning about froth.
- Thematic narrative (“enterprise AI will reshape everything”) doing as much work as current earnings.
3.2 Concentration Risk: When 7 Stocks Drive the Story
A widely read MarketWatch column today notes that when you strip out the so‑called “Magnificent Seven” (Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia and Tesla), the S&P 500’s year‑to‑date gain shrinks dramatically. Those seven account for nearly a third of the index’s market cap and roughly 40% of its returns. [15]
That’s not a broad‑based bull market — it’s concentration risk disguised as innovation. If the AI narrative fades or just normalises, the mechanical impact on indices could be severe.
3.3 What the Pros Are Saying: AI Bubble as Top Risk
A Forbes piece reports that Bank of America’s latest survey of global fund managers now lists an AI stock bubble as the single biggest perceived risk to markets. [16]
Other coverage from 24/7 Wall St highlights that the same bank has been warning clients about “AI bubble” risk for months, even as some strategists recommend shifting into steadier dividend payers to sidestep a potential tech‑driven correction. [17]
When:
- search interest has surged,
- a handful of AI‑linked megacaps dominate index returns, and
- institutional surveys put “AI bubble” at the top of their worry list,
you’re very much in the “frothy, but not yet broken” stage of the playbook.
4. Housing: Bubble, Slow Leak, or Just a Normalisation?
The second major bubble debate today is housing — and the signals are mixed.
4.1 The Crash Camp: “Prices Could Drop 50%”
A widely circulated CRE Daily brief today highlights a stark warning from housing analyst Melody Wright, who says U.S. home prices could fall more than 50% as affordability collapses. [18]
Key points from that report:
- New Zillow data show 53% of U.S. homes have declined in value over the past year, the highest share since 2012. [19]
- Wright argues that the market is bifurcated: demand has dried up in the middle and lower tiers, leaving activity concentrated in upper price ranges, which keeps median prices deceptively high. [20]
- She believes the correction could unfold faster than in 2008, especially in previously overheated Sun Belt markets. [21]
This is very much “bubble‑burst language”: large percentage declines, historical comparisons to prior crashes, and a narrative of speculative excess unwinding.
4.2 The Normalisation Camp: “Buyer‑Friendly” Markets in 2026
On the same day, a syndicated National Desk story running on several U.S. local stations paints a calmer picture. Drawing on Realtor.com’s 2026 forecast, it reports that home prices and mortgage rates are expected to dip in 22 U.S. metro areas, particularly in the Southeast and West. [22]
Realtor.com economist Jake Krimmel calls 2026 a year when the housing market should “steady” and become more buyer‑friendly, with demand in pandemic‑boom metros like Jacksonville, Phoenix, Denver and Seattle “coming back down to earth” rather than collapsing. [23]
Even S&P Dow Jones Indices’ commentary in the same piece talks about a market settling into a “new equilibrium of minimal price growth”, rather than a wholesale crash. [24]
4.3 So Is Housing in a Bubble?
Using the Economist playbook:
- Valuations in many U.S. markets are still stretched relative to incomes.
- Search interest and media focus on “housing crash” are picking up again. [25]
- Expert views are sharply divided — another late‑cycle trait.
But several structural factors (tight lending standards, low fixed mortgage rates, persistent under‑building) argue against a 2008‑style forced‑selling cascade. [26]
A more nuanced read: housing looks frothy and locally bubbly, especially in pandemic boomtowns, but the likely path is a rolling, uneven correction rather than a single, spectacular pop.
5. What Professional Investors Are Doing With These Signals
5.1 Central Banks and “Excess Liquidity”
The Bank of England’s latest Financial Stability Report warns that many risky asset valuations remain “materially stretched,” highlighting technology as a particular concern and singling out excess liquidity as a driver of speculative behaviour. [27]
That’s straight out of the bubble handbook: central bankers rarely talk this bluntly unless they’re genuinely worried.
5.2 Bank of America: More Growth — and More Risk
Bank of America’s Global Research team just published a 2026 outlook arguing that markets have had a strong 2025, and that growth could be stronger than expected next year — but largely because the same forces that fuelled this year’s rally (AI surge, record deficits, excess liquidity) are still in play. [28]
In other words, the engine powering potential future gains is the same one inflating bubble fears.
5.3 Strategists: “We May or May Not Be in a Bubble — but Timing It Is Impossible”
Sosnick’s “Bubble Talk Among Friends” essay, written yesterday, lines up neatly with The Economist:
- Bubbles are obvious in hindsight and offer plenty of warning signs.
- Markets can stay irrational longer than traders can stay solvent.
- Froth is already coming out of fringe sectors like speculative crypto and some quantum‑computing and “pump‑and‑dump” plays, but the core winners (like mega‑cap AI stocks) are still holding up. [29]
His bottom line: you should tune your risk not to the pundit chatter, but to your personal tolerance and time horizon.
5.4 MarketWatch: Who Should Get Out of Stocks Now?
A new MarketWatch opinion column making the rounds today takes an age‑based approach:
- Young investors (Gen Z and younger) can treat any future AI bust as a buying opportunity, because they have decades to recover.
- Millennials should keep investing but rebalance away from the frothiest themes.
- Gen X and Boomers nearing or in retirement should prioritise capital preservation, shifting gradually toward bonds, cash and guaranteed income. [30]
The author’s clear message: if you need the money you have in stocks within the next five years, you probably shouldn’t be heavily exposed to assets that everyone is debating as a possible bubble.
6. A Practical 10‑Point Bubble Checklist for 2025
Putting it together, here’s a simple checklist to apply to any hot asset — AI stocks, housing in your city, crypto, you name it:
- Search & Social Spikes
Are Google searches, TikTok mentions, Reddit threads or X chatter about the asset spiking to new highs? - Valuations at Extreme Highs
Are price/earnings, price/sales or rent‑to‑income ratios at or beyond previous cycle peaks — with “this time is different” as the main justification? [31] - Central‑Bank or Regulator Warnings
Are institutions like the Fed, ECB or BoE explicitly warning about “stretched valuations” or “excess liquidity” in that sector? [32] - Career Pressure on Professionals
Are cautious portfolio managers under fire for underperforming because they didn’t own enough of the hot theme? Are more aggressive managers being celebrated? [33] - IPO and Funding Frenzy
Are loss‑making or very young companies rushing to IPO at massive valuations, as with Anthropic’s potential +$300bn debut? [34] - Retail Speculation & Leverage
Are retail investors piling into options, margin and “get rich quick” plays linked to the theme? Are personal stories of huge wins (and losses) everywhere? [35] - Index Concentration
Is a small cluster of stocks or assets contributing a disproportionate share of index returns, as with the Magnificent Seven? [36] - Earnings vs Expectations
Are earnings or real‑world adoption lagging far behind the valuation curve, as analysts ask whether AI revenue can catch up with trillions in market cap? [37] - Policy and Liquidity Backdrop
Is easy money (low rates, generous fiscal policy) still flowing, and are policymakers hinting that the punch bowl will be taken away? [38] - Your Own Behaviour
Are you feeling FOMO, tempted to abandon your plan because “everything is going up”? That emotional shift is often the last mile of a bubble.
You don’t need all ten boxes ticked to be worried, but if seven or eight are flashing at once, you are probably in late‑stage territory.
7. What to Do Right Now (Without Trying to Call the Exact Top)
None of this is personalised financial advice, but you can use the framework to think about risk in concrete terms.
If You’re Early in Your Investing Journey
- Keep dollar‑cost averaging into diversified funds rather than chasing the hottest AI or real‑estate names.
- Treat any eventual bubble burst as a training ground, not a catastrophe.
- Avoid leverage and “all in” bets, even if friends seem to be getting rich quickly.
If You’re Mid‑Career
- Rebalance so that the hottest themes (AI, certain housing markets, speculative crypto) don’t dominate your net worth.
- Consider adding defensive sectors, dividend payers or quality value stocks to reduce sensitivity to a tech or housing unwinding. [39]
- Make sure your emergency fund and near‑term goals (tuition, down payments) are not overly exposed to bubble‑prone assets.
If You’re Near or In Retirement
- Take a leaf from today’s MarketWatch column: move step‑by‑step toward a more conservative mix — more bonds, T‑bills, cash and guaranteed income, less reliance on a narrow set of AI‑driven stocks. [40]
- Think in time buckets: money needed in the next 3–5 years should be in safer assets; long‑term legacy capital can take more risk.
- If you’ve already “won the game” financially, it may be rational to de‑risk heavily and focus on capital preservation.
Whatever your age, the most important moves are:
- Have a written plan.
- Decide in advance how you’ll react if markets drop 10–20% or more.
- Avoid making big portfolio decisions on the back of a single headline — bullish or bearish.
8. The Bottom Line: Bubbles Burst Slowly, Then All at Once
The big lesson from The Economist, Interactive Brokers and today’s news is surprisingly simple:
- Valuations tell you whether future returns are likely to be poor.
- Search interest, media narrative and professional behaviour give you hints about timing.
- No one, not even the greats, can consistently call the exact top. [41]
On December 3, 2025, AI stocks, parts of the housing market and certain speculative corners of the market are all showing late‑cycle signals: stretched valuations, intense public fascination, central‑bank warnings and visible career pressure on investors who dare to be cautious. [42]
Whether the pop comes in months or years, the safer approach is to assume you’re closer to the end than the beginningof these manias — and build a portfolio that can survive both more upside and an eventual hard landing.
References
1. www.livemint.com, 2. fortune.com, 3. www.forbes.com, 4. www.credaily.com, 5. www.livemint.com, 6. www.livemint.com, 7. www.interactivebrokers.com, 8. www.livemint.com, 9. www.interactivebrokers.com, 10. www.livemint.com, 11. www.livemint.com, 12. www.inkl.com, 13. fortune.com, 14. www.inkl.com, 15. www.marketwatch.com, 16. www.forbes.com, 17. 247wallst.com, 18. www.credaily.com, 19. www.credaily.com, 20. www.credaily.com, 21. www.credaily.com, 22. turnto10.com, 23. turnto10.com, 24. turnto10.com, 25. www.credaily.com, 26. www.credaily.com, 27. finance.yahoo.com, 28. newsroom.bankofamerica.com, 29. www.interactivebrokers.com, 30. www.marketwatch.com, 31. www.livemint.com, 32. finance.yahoo.com, 33. www.livemint.com, 34. www.inkl.com, 35. www.interactivebrokers.com, 36. www.marketwatch.com, 37. www.tradingview.com, 38. www.reuters.com, 39. 247wallst.com, 40. www.marketwatch.com, 41. www.livemint.com, 42. fortune.com
