Stock Exuberance Poses Risk to Broader Economy

A wild week for U.S. stock market indexes was accompanied by some eye-popping moves in individual listings, several of which were apparently driven by retail investors and lacked easy explanations other than exuberance. Some will be inclined to ignore this behavior, noting that, if not warranted, its consequences will be isolated and containable. While not ignoring it, regulators will end up taking a lassiez-faire attitude toward it primarily because their power and tools only go so far. Others, like me, will spend time thinking not only about the potential consequences, be it market functioning or distributional factors, but also the causes and their wider implications.

By now, and as illustrated by the Bloomberg article cited above, there is quite a list of individual stocks to choose from to indicate investor exuberance that could easily spill over into reckless risk-taking and speculation. My top pick is Hertz, which is going through a particularly rough time. (I know the iconic company well as a longtime customer.)