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Long-term investment success requires us to be fearful when the majority is complacent. This is one of those times.
It’s not just retail investors who are complacent these days. Complacency is widespread among sophisticated institutional investors who should know better, too.
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Particularly noteworthy is the attitude of the global elite who are gathering in Davos, Switzerland, next week for the annual World Economic Forum. The WEF was created in large part to anticipate global risks, and yet this year’s participants seem largely oblivious to the possibility that equities in general, and U.S. equities in particular, are forming a bubble that could soon burst.
In the 2025 edition of the WEF’s annual Global Risks Report (the 2026 report is due soon), participants placed “asset bubble burst” in 19 th place in a ranking of global risks deemed “most likely to present a material crisis on a global scale” last year.
You might excuse this complacency on the grounds that the elite are focusing on global, existential questions — issues such as war, extreme weather events, the breakdown of civil society and so forth. But that would be crediting them with too much unselfishness, given their behavior the last time the global financial markets nearly became unraveled.
That occurred in the global financial crisis, of course. In the January 2009 issue of the WEF’s Global Risks Report — two months before the crisis finally bottomed, participants ranked “asset price collapse” as the biggest near-term risk the world then faced. Surely we can all agree that the risk of a bubble in early 2009 was far less than it is today.
If you had any doubt, consider the S&P 500’s SPX valuation in early 2009 versus now. As the table below shows, the S&P 500 then was much more reasonably valued than it is now.
The world elite’s preoccupation in 2009 with a collapse in asset prices — and its complacency today — reveals what’s known as recency bias, which is defined as “a cognitive bias that favors recent events over historic ones. … [R]ecency bias gives greater importance to the most recent event.”
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There is no easy antidote to recency bias. Becoming a student of financial-market history is helpful, though probably not enough to overcome recency bias. More important is having lived through a bursting bubble, or at least suffering through a severe and protracted bear market. Edward McQuarrie, a professor emeritus at Santa Clara University, and William Bernstein of Efficient Frontiers have written that “there’s a difference … between being told that markets can fall by more than 50% and having it burned into your memory banks by seeing your net worth halved in real time as the economy careens toward the precipice.”
One possible solution is to enlist the services of a financial planner who has been involved in the markets long enough to have experienced a severe bear market. When this bull market does finally come to an end, you will be glad to have that knowledge on your side.
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at
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