U.S. Market Bubble Raises Alarm

FINANCE
U.S. Market Bubble Raises Alarm

The U.S.’s outsized influence in global financial markets has reached unprecedented levels, creating what Ruchir Sharma, chair of Rockefeller International, calls the “mother of all bubbles.” In a recent Financial Times column, Sharma noted that global investors are funneling record amounts of money into the U.S., driven by “awe of American exceptionalism.”

Today, U.S. companies account for 70% of the leading global stock index, up from 30% in the 1980s, despite the U.S. economy comprising just 27% of global GDP. This imbalance persists beyond the AI-driven tech boom, with U.S. stocks outperforming the world by 4-to-1 since 2009.

In 2024 alone, $1 trillion in foreign capital flowed into U.S. debt markets—double the eurozone’s figure—while America commands 70% of global private equity and credit. Sharma warns this could harm smaller markets by weakening currencies and forcing rate hikes, slowing their economies.

Echoing Sharma, Allianz’s Mohamed El-Erian predicted continued U.S. dominance but warned of a global “sucking sound” as capital exits other regions. Meanwhile, hedge fund manager Mark Spitznagel called this the “greatest credit bubble in human history.”

Despite bubble warnings, Wall Street anticipates further growth, with S&P 500 targets reaching up to 7,000 by 2025.

FINANCE
Trump Defends Tariff Price Risks

President-elect Donald Trump declined to ensure his proposed tariffs wouldn’t lead to higher prices for American consumers. In an interview on Meet the Press, Trump said, “I can’t guarantee anything,” adding that tariffs are a powerful tool.

During his campaign, Trump proposed tariffs as high as 20% across the board and up to 60% on China. Post-election, he threatened a 25% tariff on Canada and Mexico unless they curbed illegal immigration and drugs, and an additional 10% on Chinese imports.

Businesses often pass tariff costs onto consumers, raising concerns of price hikes. Retailers like Dollar Tree warned tariffs could force price increases and limit product availability. Meanwhile, U.S. businesses have been stockpiling goods to mitigate potential impacts.

While Trump claimed his previous tariffs didn’t cause inflation, experts noted they also failed to bring promised manufacturing jobs back to the U.S. Trump argued tariffs serve economic and geopolitical purposes, describing them as a tool to prevent conflict.

TOKYO
Tokyo Tests 4-Day Work Week

Facing a population crisis, Tokyo is introducing a four-day work week to address declining birth rates and the challenges of Japan’s aging society. Starting in April, the Tokyo Metropolitan government will allow employees to work only four days a week, while also implementing a “child care partial leave” policy, enabling some to work two fewer hours daily.

Governor Yuriko Koike announced these changes aim to support parents balancing work and childcare, addressing societal pressures that force women to choose between careers and family. Japan’s fertility rate hit a record low of 1.2 in 2023, with Tokyo’s rate even lower at 0.99. A rate of 2.1 is needed to maintain population stability, highlighting the urgency of the issue.

Decades of government efforts, including parental leave, daycare subsidies, and cash incentives, have failed to reverse the trend. The four-day work week could help ease Japan’s heavy work culture, especially for women who shoulder five times more unpaid labor than men.

Global trials have shown that shorter workweeks improve productivity, reduce stress, and increase housework equity, but experts caution against assuming it’s a universal solution. Tokyo’s experiment could provide valuable insights into addressing work-life balance and population challenges.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.