Bloomberg Surveillance · Thursday, August 6, 2026
Bob Elliott of Unlimited Funds believes the current stock market rally is driven by misplaced optimism and fear of missing out (FOMO), characterizing it as 'classic bubble type activity.' He points to extraordinarily high earnings expectations, the highest in the post-WWII era, coupled with significant leverage across various financial instruments, as indicators of an overbought market operating on borrowed money.
“It's classic bubble type activity. I'm calling the top in a bubble a little challenging. Anyone who's been in this business for long enough knows, but when you see something like that, you've got to recognize that levering in and going full bore on the bubble is often an imprudent move.”
“Well, I think a classic bubble is extremely high expectations, which, to be clear, on earnings, we have the highest expectations for earnings growth over the course of the next five years that we've had in the post World War two era.”
“This isn't the leverage of the GFC concentrated in highly levered banks. This is like Wells Fargo giving significant amount of securities leverage to their wealth clients. This is leverty TFS, this is options trading. It's kind of everywhere and diffuse, so it's hard to point to the exact place where all the leverage is piling up, but it's kind of everywhere.”