Warning signal of a bubble! As the US stock market hits new highs, an indicator of "irrational exuberance" has broken the danger line.

The speculative frenzy has once again swept through the entire US stock market, with a crucial indicator of "irrational prosperity" breaking through the bubble warning line. After experiencing the impact of the April tariff sell-off, the US stock market quickly regained lost ground, and as of the time of writing, the three major indices are continuing to consolidate near historical highs. The issuance of Special Purpose Acquisition Companies (SPAC) has significantly rebounded, and the flagship fund ARK Innovation ETF (ARKK) managed by the so-called "technology stock goddess" Cathie Wood has achieved historical-level gains. These phenomena are driving the rapid rise of the market "irrational prosperity" monitoring indicator developed by Barclays Bank. This classic concept proposed by former Federal Reserve Chairman Alan Greenspan aims to warn of the potential risks of asset prices deviating from their fundamental value. According to the latest data from Barclays Bank, their exclusive "irrational prosperity index" exceeded a double-digit threshold for the first time since February, reaching a caution level of 10.7%. The index is calculated by combining derivative market data, volatility technical indicators, and options market sentiment signals, with a historical average of about 7%. However, it tends to exceed the 10% mark during periods of extreme market enthusiasm. Looking back at history, this index has only reached similar heights during the late 1990s internet bubble and the retail frenzy of 2021. Roundhill Investments CEO Dave Mazza pointed out, "The current market is showing typical speculative characteristics, with the trends of popular concept stocks resembling lottery draws, and traditional fundamental analysis gradually becoming ineffective." He observed that sentiment indicators such as Relative Strength Index (RSI) and price-to-earnings ratios are collectively rising, and this irrational prosperity is laying the groundwork for potential sharp volatility caused by negative news in the future. Market optimism stems mainly from two factors: expectations of the US reaching agreements with major trading partners and speculation that the Trump administration may postpone the July 9 tariff effective date. Coupled with the continued ferment of the Federal Reserve interest rate cut expectations, this has driven the S&P 500 index to achieve its first closing historical high since February. Bubble characteristics are emerging in multiple areas: the number of newly listed SPAC companies for 2025 has exceeded the total for the past two years, the ARK Innovation ETF has recorded the third largest increase in history, and sector performances are more extreme. In the second quarter, Bitcoin concept stocks surged by 78%, quantum computing sector soared by 69%, meme stocks averaged a 44% increase, and the portfolio with the highest short interest actually rose against the trend by 29%. Stephano Pascal, head of Barclays' US stock derivative strategy, emphasized, "The index reading surpassing the threshold indicates that investor sentiment is excessively exuberant, and there is an amplified risk of market volatility." It is worth noting that this index is highly positively correlated with indicators of retail participation such as net borrowing positions in margin accounts. Despite frequent bubble signals, Pascal believes that timing accurately remains a challenge, as historical experience shows that bubble durations often exceed market expectations. He advises investors to go with the trend while using options tools to build risk-hedging portfolios to guard against potential setback impacts. The current market situation once again confirms that in an environment where ample liquidity and speculative enthusiasm intertwine, asset price volatility may continue to test investors' nerves.