Interest rates are very low. This makes asset prices high. This is not quite the same thing as a bubble, though i'm sure when the Fed inevitably raises rates an

Interest rates are very low. This makes asset prices high. This is not quite the same thing as a bubble, though i'm sure when the Fed inevitably raises rates and prices crash, people will declare it to have been a bubble. That doesn't mean that specific sectors aren't in some sort of bubble (e.g. crypto). But high asset prices across the board can be explained most simply by the incredibly low interest rate environment, which values future cash flows nearly equally with present cash flows. Inflation pushes nominal asset prices up even further, too. If you think inflation is going to continue due to supply chain pressure in China, and/or labor pressure in the US, then the Fed is going to have to raise rates. When they do that, one of two things will happen: Either they'll be sufficiently large to curb inflation, which means that asset prices will probably decline fairly significantly, or they won't, in which case inflation will continue, and asset prices will stay elevated, though perhaps not keeping up with inflation. It's also possible that China will be less disrupted by Omicron than some people think, and that US businesses will re-allocate labor more efficiently and more quickly than some people expect (via some mix of increased automation and rationalization), and the supply side issues will resolve themselves. If that's the case, the Fed may be able to leave rates alone for now. And in that scenario, there's no major reason for a significant decline in asset prices, though that doesn't mean one can't happen for other reasons. Ultimately, inflation is the ratio between money and stuff (including services). Asset prices are the risk adjusted present value of future cash flows. Both of these things are influenced simultaneously by interest rates, and the underlying real economy. Another thing to note is that, to some extent, what we're seeing in the public stock market is the effect of increasing returns to scale. People mistakenly equate the public markets with the broader economy, and while that intuition isn't completely wrong, it's not completely right, either. The stock market is heavily biased towards large scale businesses, and nearly uniformly excludes small businesses. This isn't some nefarious plot, just the mathematics of the cost of listing and the utility of exogenous capital. But the bias that encodes is that at a time when small businesses are rapidly failing and large businesses are absorbing their market share, the stock market may be performing quite well, despite the underlying economy experiencing troubles. This isn't irrational in an economic sense, it's just that the stock market doesn't perfectly track the underlying economy for this, and other reasons.