Wall Street breaks records and its executives warn of “bubble territory”

Investors seem to mostly ignore negative news regarding tariffs and their effects on the economy and the long government shutdown, and prefer to focus on the positive news, such as good financial reports and developments in the field of AI. At the same time, other stock exchanges in the world are also breaking records, including the stock exchange in Tel Aviv.

Until a few weeks ago, both the price of gold and the price of bitcoin broke records, but since then gold has traded with some volatility and weakened, and bitcoin fell by a double-digit rate in relation to the dollar – while the stock market remained immune. Is a change now expected in this case as well? The issue seems to be coming up more and more as a reasonable possibility. Senior CEOs on Wall Street warn against the possibility of a correction of more than 10% in the next 12-24 months. According to them, this is a positive move.

Healthy market development or crisis?

Mike Gitlin, CEO of the investment company Capital Group, was quoted in Bloomberg as speaking at a financial conference held in Hong Kong. Gitlin said that the companies’ financial reports are strong, “but what is challenging is the valuations.” When asked whether today’s stock prices are low, fair or “full,” Gitlin said that “most people would say we are between fair value and full value.”

Gitlin is not the first to raise concerns about market pricing. The CEO of Goldman Sachs, David Solomon, said several weeks ago that he expects that at some point there will be a “rest” in the market, and added that “after the highs reached thanks to AI, I would not be surprised if in the next 12-24 months we see a decline in the stock markets”. This is not the case in the market as a whole.

Solomon advises the bank’s clients to continue investing, look at their investment allocation and avoid trying to time the market. “Decreases of 10%-15% in the stock market often occur during positive cycles, without changing the general direction of the capital flow or the long-term allocations – it is not something that changes the basic and structural belief about how you want to allocate the capital,” Solomon said.

At the same time, the Economist mentioned that JPMorgan CEO Jamie Dimon recently warned that many assets “look like they’re entering bubble territory.”

Another executive who raised the issue of the possible correction in the market is Morgan Stanley CEO Ted Peake, who said that there is still a risk of “policy mistakes” related to the geopolitical uncertainty between the US and China. According to him, “the markets do look expensive, but the reality is that the systemic risk has probably been reduced”, and he estimates that the market will put more emphasis on the companies’ profits in 2026. Pick also expects higher dispersion – strong companies will outperform in his estimation, while the weaker ones will lag behind. According to Pick, investors should welcome corrections in the market, because this is a healthy development and not signs of a crisis.

The IMF: “The risk is not properly priced”

The warnings about a correction in the market also came from the International Monetary Fund (IMF), which a few weeks ago warned in its financial stability report that global markets feel too comfortable with the risks that could cause a correction.

The fund stated that the markets have demonstrated resilience since April, mainly due to the expectation of monetary easing in the central economies, but beneath the surface there are changes that lead to weaknesses. For example, in the fund’s assessment, the risk is not properly priced. The fund’s economists also noted that the enthusiasm for the large AI stocks creates a lot of concentration, which may lead to a sharp and sudden correction.

Palantir as a symbol of the bubble: the fallout after the reports

One of the stocks that you think of when talking about “full” pricing stocks, if not more, is Palantir . The stock reached an all-time high this week, which reflected its market value of almost half a trillion dollars – about five years after it began trading at a value of 20 billion dollars. In the last year the stock jumped by about 400%.

However, after the publication of the reports for the third quarter on the Monday after trading, the stock fell, which raises the question of whether it is a change of direction, or just the realization of profits after the good reports.

Palantir is one of the most expensive stocks on Wall Street in terms of multiples, and analysts have been struggling to justify its value for a long time. It currently trades at a forward earnings multiple of 217, nearly 10 times the S&P 500 average.

For example, analyst Brent Thiel of Jefferies recommends the stock as an “underperform” at a target price that reflects a 66% discount. After the reports, he explained that the numbers are strong and, in general, “we like Palantir, but the risk/opportunity ratio in this multiplier makes other stocks in the field more preferred by the bank.

This week it was also announced that investor Michael Berry, famous for predicting the subprime crisis in 2008, is now betting through his investment fund, Scion Asset Management, against shares of Nvidia and Palantir. Berry purchased put options on both companies, a move that yields a profit in the event of a decline in their stock prices.

The publication came a few days after he himself published a mysterious warning on the X network, according to which “sometimes we see bubbles. Sometimes we can do something about it, but sometimes – it’s better to do nothing.” Palantir, managed by its co-founder Alex Karp, supplies AI systems to armies and intelligence agencies, and simultaneously operates in the civilian market as well.