Martin Wolf; The next crash - Why this time might not be different

Stock markets are not only ignoring the obvious threats, but seem imbued with extreme optimism.

In the autumn of 1929, Irving Fisher, one of the greatest American economists, stated: “Stock prices have reached what looks like a permanently high plateau.” 

This turned out to be one of the most incorrect forecasts ever made: in short order, US and global stock markets were hit by the Great Crash, which was followed by the Great Depression.

Maybe markets were in some sense “right” before the crash and wrong after it. But who cared? For investors and the hundreds of millions of people across the world whose lives were upended by the disaster, the gods of the stock market had failed for a generation.

Why might this story be relevant today? The answer is that the valuation of US stocks is even higher today than in September 1929. 


The first global financial crisis after the disaster of the 1930s in 2007-09: the easy monetary — and relaxed regulatory — policies adopted after the stock market bubble burst 1999 contributed to the financial crisis.

The best-known metric is the cyclically adjusted price/earnings ratio developed by Robert Shiller.

Historically, when US valuations have come close to this sort of level, a crash has followed. Stocks almost always fall much more quickly than they rise. Will things be different this time?

The view that artificial intelligence is a transformative technology is quite reasonable. Over-investment, destructive competition, waves of bankruptcies and then painful consolidation are standard features of such episodes

At some point people will realise this, and the market will crash.

Private debt is also worrying.

Another is the lack of transparency created by the growing role of non-bank financial intermediation, especially in the US. 

So, what are investors to do? This depends, as always, on both their time horizons and capacity for bearing losses. 

In today’s world, remember the downside risks.

Martin Wolf Financial Times 18 July 2026

https://www.ft.com/content/de2978b0-481c-4af5-9e77-9e34650fb20f?syn-25a6b1a6=1


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