In financial markets, a bubble occurs when the level of investment in an asset becomes persistently detached from the amount of profit that asset could plausibly generate. While investors are always making bets on an unknown future, bubbles form when large swaths of investors continuously pour ever more into an asset, with seemingly little regard for how much it could earn and when.

 

Warning: Our Stock Market Is Looking Like a Bubble

By Jared Bernstein and Ryan Cummings

Mr. Bernstein was the chair of President Joe Biden’s Council of Economic Advisers from 2023 to 2025. Mr. Cummings served the council as an economist from 2021 to 2023.