Notes on the Week Ahead Checking the Foundations of a Roaring Bull Market
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Sep 22, 2025 The discussion reflects on a memorable lunch in 2009 where a bet was placed concerning market recovery. It explores the evolution from the financial crisis low to the bull market and highlights how market values have surpassed GDP growth since the mid-1980s. The conversation dives into earnings, valuation risks, potential market shocks, and provides advice on tax-efficient diversification. The final thoughts encourage a strategic shift from U.S. megacap stocks to include international equities and alternative investments.
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Lunch Bet At Market Bottom
- David Kelly recounts a lunch bet on March 6, 2009 about how long the market would take to recover from its low.
- He claims he won but lost the record and possibly the lunch stake, illustrating the personal memory of the crisis.
Bull Market Driven By Profits And Multiples
- U.S. stock market gains mainly reflect rising profit share and higher P/E multiples, not stronger GDP growth.
- The long bull run effectively began in the mid-1980s when equity value started to outpace the economy.
Market Cap Far Exceeds GDP
- Market capitalization of U.S. corporate equity has climbed from about 72% of GDP to a record 363% recently.
- This dramatic ascent highlights how equity values have detached from underlying economic size.