The recent surge in tech stocks has true believers buzzing that the downturn of late last year is over and the boom of the past decade is back. But the opposite case is more likely. This surge had all the hallmarks of an echo bubble — a brief rebound of the kind that has punctuated the long decline of every major bubble in the past century.
Over the past decade, driven by record-low interest rates, valuations reached historic highs in assets ranging from stocks to bonds and property. It was labelled an “everything bubble.” But the mania was concentrated in certain tech sectors, from crypto to the largest American and Chinese internet stocks, and peaked in 2021.
Then inflation suddenly returned after a long absence, and interest rates rose sharply. The bubble popped late last year, and we have just witnessed the first echo.