I've been thinking a little about the potential bubble we are in right now due to the low interest rate environment. I thought about writing a little about it, but well, I don't know too much and am not invested enough to care to dig deep and analyse.
That said, I do get concerned when people blindly follow the narratives out there without digging deeper.
So in my limited knowledge I'll just say this - we may or may not be in the midst of an economic bubble. Stock prices relative to their earnings are at all their all time high in the midst of a global pandemic where businesses are badly hurt. There are many reasons for this - growth companies continuing to excel in the pandemic due to mostly being tech companies, lack of consumer spending on other things hence spending on stocks instead, low interest rate environment making other investments unattractive in comparison, expansionary monetary policy by many governments leading to there being more cash overall, and so on.
No one really knows what will happen next. Maybe we're in a bubble, maybe we're not. Even if we're in a bubble, maybe it will continue to climb for a bit, and when it bursts it won't fall that hard. It's impossible to tell.
I would just advice caution to those who are a little too overconfident. Sure go ahead and do what you want, but be aware of the exposure to this downside risk, and don't be too greedy. Put in what you can afford to lose.
The bull market of the past decade has created many success stories, but instead of assuming it will simply continue as the natural law of things, it is helpful to think about what are the underlying factors that cause things to be the way they are, and whether those factors will continue to hold in the long run.
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