Published October 10, 2025
Talk of bubbles is fairly rampant these days with parabolic rises in silver and other metals joining huge jumps in prices of anything AI-related (the circular AI bubble being its own bubblicious beast). The MarketWatch article below reminds us that the popping of the late-90s “dot com” bubble was not a straightforward affair, but rather a process. It is that process of unwinding that leads to the very helpful and wealth-protecting SELL signals our models generate (as we did then and again in 2007-2008).
Here’s the MarketWatch reminder of the late-90s bubble:
“The stock market seems to be taking a bit of a breather after registering another record high this week.
But bulls remain confident. The historically high valuations are not a concern, they argue; once the third-quarter earnings season really kicks into gear next week investors will be proven correct to be so optimistic, they reckon.
There’s even a positive take from the ongoing political turmoil. Fundstrat’s head of research Tom Lee thinks that investors are seeing through the U.S. government shutdown “noise” and recognize that any hit to economic activity will only make the Federal Reserve more dovish.
Add to that the typical seasonal rally, which observers believe is partly caused by fund managers scrambling to ensure they can show 2025’s winning stocks in their portfolios, and Lee still sees 7,000 for the S&P 500 SPX by year-end.
Indeed, talk of a market melt up has been doing the rounds in recent days after Paul Tudor Jones, the billionaire investor and founder of Tudor Investment Corp., warned that stocks were in a bubble, but that could still mean they surge further before hitting a “blow off” top.
“All the ingredients are in place, and, certainly from a trading standpoint, you have to position yourself like it’s October 1999,” Jones said during an interview with CNBC this week.
To recap, the Nasdaq Composite COMP having already rallied that year, pretty much doubled from early October 1999 to the dotcom bubble peak in March 2000.
Jones’s comments are catnip for bullish investors convinced that they have the ability to recognize when the bubble will burst, and therefore they can keep enjoying the rally. The Nasdaq is already up 19.2% this year.
However, it’s not as simple as that, says Matthew Maley, chief market strategist at Miller Tabak. In an email shared with MarketWatch, Maley accepted that Jones’s observations carry weight.
“Mr. Jones did not become a billionaire by being stupid, so these comments are something which have (correctly) received a lot of attention…especially since he indicated that investors should be set up for this kind of very bullish move,” says Maley.
In addition, he noted that Jones wasn’t just saying a “melt-up” is possible, like many are, but that it is probable.
But, crucially, it’s important to recognize that the Nasdaq’s surge in late 1999 through to its peak did not occur in a straight line. “In fact, there were quite a few rather large declines in the middle of that 6-month ‘melt up’ move!,” Maley says.
And they were pullbacks of a magnitude that may have caused bulls to fear the good times were over.
The first thing he notes is that the Nasdaq’s October 1999 rally started after it had just fallen 11%, using intraday metrics, in the middle of that month.
And there were three more declines of 13%-14% after the rally began and through that six-month period 25 years ago. “With this in mind, investors might want to be careful about assuming that a further rally in the stock market…even if it’s a major one…will [be] without some scary declines along the way,” he says.
Maley adds that at some point there will be a rush of data when the U.S. government re-opens and this may coincide with the new earnings season, “therefore, we could start to see some wild moves…in both directions.”
“Thus, even if Paul Tudor Jones is correct…and the market does rally in a major way over the next six months…it could be a more volatile ride than some people are assuming right now. This will be particularly important to consider for those who are very active with their trading…and/or are more short-term oriented,” Maley concludes.”
Market Update
Stocks opened this week adding to recent gains with the Nasdaq rising +0.7%. News of a major agreement between ChatGPT maker OpenAI and semiconductor firm AMD continued the rally in the semi sector. AI has been a massive boon to Nvidia as the AI data center buildout requires enormous numbers of chips. Now, AMD is poised to see its revenue multiply as well on the new technology. Concerns about the circular nature of the AI deals began to hit semi stocks Tuesday. The Nasdaq gave back Monday’s rise in Tuesday’s session while gold surpassed $4000 an ounce (after starting the year around $2600). The yellow metal has been the leading asset class this year as a safe-haven bet due to uncertainty over U.S. trade and budget issues alongside a general rise in global trade and political unease. Nvidia chief Jensen Huang dispelled the budding concerns over AI “double-counting” of deals Wednesday noting that the company’s revenue has “gone up substantially” even in the past six months. Equipment maker Dell noted a similar surge in revenues siting AI infrastructure buildouts as a major driver. The Nasdaq shot upward by +1.1% to a record high. Consumer companies Delta Airlines, Costco, and Pepsi all reported strong results Thursday. But it wasn’t enough to lift the broad market as investors kept the indexes slightly lower on the day. Friday brought the first selloff in weeks with news of a cancelled meeting between Trump and Chinese leader Xi seeming to be the impetus for the change in market tone. Over recent months, investors have been expecting that the U.S. and China were on a path to a tariff agreement. China appeared Thursday to take a harder line on rare earth metals, a key negotiating point in the talks. That led to Trump’s change of mind on the possible upcoming meeting and threats of higher tariffs. Market participants chose to cash in some of their gains and downgrade growth prospects. Bond prices moved strongly higher to join precious metals as a safe haven Friday while stocks were taken to the woodshed. The Nasdaq tumbled -3.5% to close at its worst levels of the day.
For the first time, really, since the beginning of August, stocks encountered notable selling this week. The S&P 500 (SPY) slipped -2.42% while the Nasdaq 100 (QQQ) fell -2.27%. Small cap stocks (IWM) gave back three weeks’ worth of gains in a -3.27% weekly loss.
Warm wishes and until next week.