‘Extreme caution needed’: Why the Wall Street Boom Might End in Bust

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Indeed, equities are defying negative news, showing resilience even as investors contend with multiple headwinds, including a wave of trade tariff increases, downward revisions to jobs data, and the persistent economic uncertainty from the ongoing government shutdown, which has already weakened the U.S. dollar.Historically, the macroeconomic effects of government shutdowns have been uneven and equity markets have often looked beyond such disruptions, focusing instead on underlying monetary and earnings trends. Given that, the present, record-high level of equity valuations makes the market exceptionally fragile, necessitating caution against any unforeseen negative policy decisions or fundamental surprises. In the face of extremely expensive stocks, Kar Yong Ang, a financial market analyst at Octa Broker, examines whether the rally can endure and what risks traders should oversee.The U.S. stock market pricing has surpassed the dot-com bubble peak and even pre-1929 levels. The Shiller Cyclically Adjusted Price-to-Earnings (CAPE) ratio, which helps to assess long-term stock market valuations, currently hovers around 38–39, which is more than double the long-term historical average (around 17). This level indicates potentially lower returns over the next few decades.Even before the 1929 crash, valuations did not sustain such highs. The Buffett Indicator, which compares total U.S. stock market capitalisation to Gross Domestic Product (GDP), has surged above 200% by the end of September 2025. For comparison, it peaked at 150% during the dot-com boom and at 118% ahead of the 2008 financial crisis.Historically, markets priced at such extremes have delivered either prolonged periods of weak returns or sharp corrections. Weaker-than-expected earnings, reduced liquidity, or sudden macro shocks can trigger a major downtrend. Since the current rally is mostly supported by increased liquidity driven by the Federal Reserve’s (Fed) recent interest rate cut rather than fundamental factors, valuations may significantly drop as the investors’ sentiment shifts.Source: Trading View, Octa broker‘From the technical analysis perspective, the summer surge was a huge deal. Breaking past that 6,120–6,170 barrier essentially opened the door straight up to the 6,800 range’, explained Kar Yong Ang, looking at the S&P 500 chart (see above). ‘I think both the big trading algorithms and the fund managers have the 7,000 mark as a key psychological target. We could easily see a quick push toward, or even slightly above that level, possibly hitting 7,142. But watch out, because a sharp technical pullback is likely from there. Frankly, I wouldn’t bet on this continuous, scary-looking rally. It’s smarter to hunt for quick, tactical opportunities in specific stocks or sectors rather than buying the whole index’.Although the U.S. stock market remains surprisingly calm after the government shutdown, several economic risks can still trigger sharp corrections in the short term.CGU et Politique de confidentialitéPrivacy & Cookie SettingsMore InfoS&P 5006,753.72 +39.13 (+0.58%)Dow 3046,601.78 -1.20 (-0.00%)Nasdaq23,043.38 +255.01 (+1.12%)Russell 20002,483.99 +25.57 (+1.04%)VIX16.30 -0.94 (-5.45%)Gold4,035.50 -35.00 (-0.86%)PortefeuilleConnectez-vous pour accéder à votre portefeuilleSe connecterLes plus performantsDGNX Diginex Limited 30.99 +6.79 (+28.06%)NTLA Intellia Therapeutics, Inc. 24.47 +4.03 (+19.72%)APGE Apogee Therapeutics, Inc. 47.24 +7.51 (+18.90%)FIG Figma, Inc. 71.08 +10.24 (+16.83%)RXRX Recursion Pharmaceuticals, Inc. 6.09 +0.86 (+16.44%)Les moins performantsFICO Fair Isaac Corporation 1,695.01 -184.54 (-9.82%)OPEN Opendoor Technologies Inc. 8.49 -0.80 (-8.61%)JOBY Joby Aviation, Inc. 17.37 -1.54 (-8.14%)JEF Jefferies Financial Group Inc. 54.44 -4.66 (-7.88%)AAP Advance Auto Parts, Inc. 52.59 -4.25 (-7.48%)Les plus liquidesOPEN Opendoor Technologies Inc. 8.49 -0.80 (-8.61%)BULL Webull Corporation 12.66 -0.14 (-1.09%)RGTI Rigetti Computing, Inc. 43.23 -0.67 (-1.51%)AMD Advanced Micro Devices, Inc. 235.56 +24.05 (+11.37%)PLUG Plug Power Inc. 3.6550 -0.2150 (-5.56%)Événements concernant les bénéficesÉvénements concernant mes bénéficesÉvénements concernant les bénéficesActions du momentAMD Advanced Micro Devices, Inc. 235.56 +24.05 (+11.37%)COST Costco Wholesale Corporation 914.80 0.00 (0.00%)TEM Tempus AI, Inc. 103.25 +10.24 (+11.01%)CIFR Cipher Mining Inc. 17.60 +1.85 (+11.75%)RXRX Recursion Pharmaceuticals, Inc. 6.09 +0.86 (+16.44%)Principaux événements économiques