Is the equity bubble bursting?

Equity market valuations are precarious. Until recently, they have continued to rise despite rising bond yields. Bullish momentum appears to be declining.

There are now concerns expressed about some of the financing practices over AI data centres and associated activities. Consequently, tech-heavy equity indices from NASDAQ to the Nikkei to Korea’s Kospi have taken a tumble. This is the Kospi:

Its bear market has been in place since June. The downturn in Japan and NASDAQ is a relatively new shock. It’s not just a question of trouble with data centres, but will a funding crisis in this vital area of the economy spread to other stocks? There’s evidence of this risk to the wider market from two sources. One is the valuation extreme of equities relative to bonds, and the other is record levels of bullish leverage.