Everywhere we look, the world looks bubbly.
Politically, we may point to the anger bubbling among people who feel like they were robbed of power ‒ or their opponents who want to wield that power for their own, not exactly goodhearted purposes. Economically, we may point to the monetary extravagances of 2020, and whether we’ll ever get out from under this pandemic yoke.
Financially, the stock markets (and certain cryptocurrencies) are also thankful recipients for the epithet ‘bubble’. Last year, as the US economy faltered some 4-5% ‒ much more than during the financial crisis and rivalled only by the Great Depression ‒ the S&P 500 index grew by 16.3%. Some notable stocks delivered returns in the hundreds of percent: the biotech company Moderna, +434%; Etsy, the online retail platform, +302%; Square, the fintech payment processor, +248%. The world’s largest company by market capitalization, Apple, saw its stock price increase by 77% (to which dividends added a few points’ additional return).
But none of them approached the bubbliest of all stocks: Tesla, the now-fourth largest component of the S&P 500. During 2020 it absolutely exploded in value, stating a return of over 700%.
How, you may ask, can the largest companies in the world be more valuable after a year when the economy they form part of collapsed, and the consumers and businesses who provide them with income streams lost their jobs or closed down?
Unless, say some, it’s a bubble.