Yes, We're In A Bubble & Bubbles End Badly | Ted Oakley

A market veteran isn't getting caught up in the euphoria

As 2024 draws to a close, the mood on Wall Street is very jolly.

Stocks are back to trading near all-time highs.

Positive sentiment -- be it among investors, businesses or consumers -- is suddenly spiking.

Is such exuberance merited?

Should we expect the market's good times to continue rolling in 2025?

Or, is the optimism overlooking risks -- both valuation-based and structural -- that may make next year a much more challenging one for investors?

For answers, we turn to the experience and wisdom of financial advisor Ted Oakley, managing partner & founder of Oxbow Advisors.

Ted has over 40 years experience helping clients, mostly high net worth families, protect and build wealth through good times and bad.

He believes he’s seen this kind of market mania a number of times before in his long career, and experience tells him that refraining from getting caught up in it is the best way to safeguard his clients’ long-term best interests.

To find out how Ted is currently positioning his clients’ assets for the coming year, click here or on the video below:

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SET YOURSELF UP FOR SUCCESS IN 2025: The year end is approaching fast. Schedule a free, no-commitment consultation with one of Thoughtful Money’s endorsed financial advisors to identify the right steps (e.g., tax loss harvesting, portfolio rebalancing) to secure your 2024 investment returns and position your portfolio advantageously for 2025

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Adam’s Notes: Ted Oakley (recorded 12.16.24)

EXECUTIVE SUMMARY:

• Ted described the global economy as bifurcated, with stark contrasts in performance between regions and income levels. Europe and China are struggling significantly, with Germany “in the tank” and the UK showing weak economic growth. Meanwhile, the U.S. economy appears to be stronger but remains polarized. The bottom 50–60% of Americans are facing financial challenges, while the wealthiest individuals, particularly those with stock market exposure, feel euphoric, driven by rising asset prices. Ted observed that this optimism in the U.S. is largely a result of inflated financial markets rather than broad-based economic strength, while international economic growth continues to stagnate.

• Ted pointed to current market valuations as being stretched to extremes, resembling a mania or bubble. He noted that the cyclically adjusted price-to-earnings (P/E) ratio now stands at over 38, the second-highest level in history, trailing only the dot-com bubble. Companies like Apple are trading at 10 times sales, despite nearly flat revenue growth over the past four years, while even conservative names like Walmart have reached 39 times earnings. Ted emphasized that such excessive valuations, coupled with widespread investor complacency, are unsustainable and suggest significant risks ahead.

• A major structural issue in the market is its extreme concentration, which Ted warned creates systemic risks. The S&P 500 is heavily dominated by the “Magnificent 7” tech companies, which are trading at inflated valuations and driving overall market returns. Globally, this concentration is mirrored in the MSCI index, where 75% of holdings are U.S. stocks. Ted explained that this has resulted in a “one-button market,” where investors pouring money into index funds and ETFs inadvertently overexpose themselves to the same assets. If these key companies correct, the entire market could fall, as sell-offs in index funds would drag everything down simultaneously.

• When discussing fixed income strategy, Ted emphasized the importance of