Prophecy of Another Boom in U.S. Stocks! Fu Peng Explains in Detail Why He Warned of Risks in Advance in His Column. What’s Next? [Fu Peng Talks 8]

Prophecy of Another Boom in U.S. Stocks! Fu Peng Explains in Detail Why He Warned of Risks in Advance in His Column. What’s Next? [Fu Peng Talks 8]

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U.S. stocks explode with coins again! Fu Peng explains why he preemptively warned risks in the column?

>>This article is limited to the author's own views. Click the video above to watch! This video was recorded on October 11, 2025.

A few days ago, I asked the class representative in the column’s group chat to remind about risk concerns. I also updated Powell’s risk alert for U.S. stocks in the column (click to review).

Yesterday, there was another "coin busting" event in the U.S. stock market, and many friends hoped I could explain the email content in detail. To be clear, the risk warning I sent before was brief but its core was: the most discussed topic on Wall Street lately is whether current U.S. stock valuations are too high. But in my view, the debate itself about “expensive or not” is problematic. Essentially, people discuss "is it expensive?" to really ask whether the market holds potential risks.

It’s undeniable, U.S. stocks are indeed highly valued at present; that's apparent to all. But we need to be clear that market volatility risks are not solely determined by valuation levels. Besides, the viewpoints outlined in my emails are a matter of experience. Since early September to early October, it’s been clear from the news that Wall Street is in an obvious tangle and heated debate. During this time, authorities and institutions have spoken out: the Fed clearly said current U.S. stock valuations are too high; when I sent my email, coincidentally I was reading the Bank of England's quarterly report, which also highlighted overvaluation and emphasized that market swings could spill over into the UK’s financial system.

In fact, it’s not just the Fed and BoE. For example, in the news I noted during my travels, the IMF president publicly stated on October 8th that pricing is now close to levels seen 25 years ago, drawing parallels to the dot-com bubble. He specifically said any turnaround in sentiment could spark problems, and I also think the market situation now is closely tied to sentiment. Additionally, Jamie Dimon (JPMorgan CEO) also expressed worry about the current market.

However, Goldman Sachs’ chief strategist released a report with contrary views. The report analyzes from three angles: first, it compares this market situation with the 2021-2022 valuation correction cycle—everyone surely remembers the swings then, as ARKK (run by “Cathie Wood”) dropped 70%, Nvidia stock also plummeted about 70%, and Bitcoin fell below $20k. Back then, the core driver was excessive prior valuations; currently, the expansion in market cap has support from profit growth. Second, it analyzes AI (Artificial Intelligence) competitive dynamics; third, it examines leverage levels among market entities. Based on these, Goldman Sachs thinks even though AI sector valuations are high and concentration is significant, overall risk is relatively controllable.

The split in views is evident: Jensen Huang (Nvidia CEO) thinks Wall Street may be underestimating AI’s potential; Goldman Sachs’ strategists have an optimistic view on risk; but the Fed, the BoE, IMF, Jamie Dimon, and others have been frequently warning about market risks. Moreover, other top institutions, including some hedge funds, have expressed similar concerns (check late-Sept to early-Oct reports for details).

Having experienced the subprime crisis (2008) and the 2015 Chinese stock market volatility, and having been able to avoid risk—or even gain—during crises, I want to share my perspective. The basic logic: institutions and individuals at the “top of the market pyramid” often have more complete info and broader vision. Judgment differences arise from perspective—different perspectives yield different conclusions. For example: reports by Goldman Sachs and similar organizations mostly analyze markets from a fundamental lens. But risk is not just fundamentals; as I have observed, sentiment is also a key market risk variable, and there are other latent risks. Jamie Dimon, for example, when mentioning U.S. stock risks, stressed geopolitics: this April’s tariff issues, the risk of global conflict, etc., all of which could impact the markets.

Looking closer, Jamie Dimon didn't discuss fundamentals much, nor do other authorities: generally, everyone agrees the current valuation/concentration is too high, regardless of analytical viewpoint—these are recognized risks.

In my view, the core market status is: fundamentals are “tight,” market sentiment is equally "tight and tense." Judging from AI’s profit performance and attention, there’s no clear sign the value logic of the AI chain is disproven, so from fundamentals alone, there's insufficient reason for today’s tension to turn into actual market swings. But we must not ignore other latent risks.

The market itself is “self-pricing” and responds rapidly to risks. Since early September, with authorities and big names warning of risk, we can see this in VIX (the "fear index"): 1) VIX lows are no longer moving consistently lower, but upticking; 2) the absolute VIX price is rising, and its term structure (Contango, when futures are priced higher than spot) is flattening, showing more need for risk hedging.

On the VIX, I once analyzed in a 2017 diary: VIX is essentially market “risk insurance.” If investors own lots of stocks and fear a downturn, they have two choices: ordinary folks may sell stocks, but large institutions/funds, since their selling would itself move the market, prefer to “buy insurance”—hedging via VIX derivatives. Insurers (the derivative sellers) set a “premium” (derivative price) according to market risk within a period. So trading VIX derivatives is essentially buying and selling “risk insurance.”

With Contango, the steeper the curve, the better the “sell insurance” (sell VIX derivatives) returns, and the lower the premium; as it flattens, selling gets less profitable, premiums rise. The premium level of the VIX depends on absolute price and term structure.

Since early September, VIX pricing has clearly shifted: for those wanting to buy “insurance,” premiums are higher. This micro market signal closely echoes authorities’ and bigwigs’ rising risk warnings since September, showing that market vigilance is clearly on the rise.

It must be emphasized: it’s hard to predict precise sources of risk. Take last July’s Nvidia “flash crash” (“exploding coins” in the market’s vernacular) as a classic example: after my research, I warned about Nvidia’s risks, also mentioning this to institutions during road shows. But I wasn’t analyzing from a fundamental angle (e.g., AI outlook, GPU sales), but because of excessive off-exchange leverage. This shows that, even when fundamentals are solid, other factors can cause sharp short-term swings.

A month and a half after that road show, Nvidia’s “flash crash” happened as expected. Some think this was “premonition,” but I see it as market-sense-based intuition. My main point: never assume your access to information or judgment is better than market “pyramid toppers.” Their warnings might not come true immediately, but must be taken seriously and you should be ready—acting “early” is far better than missing risk when it erupts. In the past, many investors suffered because they ignored authoritative alerts and were overconfident. So for all investors, being sensitive to market signals is crucial; never blindly dismiss warnings from the Fed, BoE, IMF or Jamie Dimon as “unreasonable,” but look at their logic and evidence. While we can’t predict when exactly risks erupt, timely avoidance is already good protection for your investments.

For example, after last year’s Nvidia “flash crash,” those who exited quickly found, once emotions calmed, the stock’s fundamentals hadn’t actually worsened—making it a great point to buy back in. That’s the lesson to take from last year’s volatility. Currently, I sense risks are building up—otherwise, such gaping divergence in opinions would not appear.

Even if we can’t pinpoint what or exactly when the risk will hit, we must keep watching high-frequency micro signals and relevant information, which helps us stay vigilant and is a good thing for making decisions. In summary: the “Is U.S. stock expensive?” debate on Wall Street isn’t the real core—volatility risk doesn't stem from fundamentals alone. Thus, Goldman's report is valid from a fundamental view, and authorities' alerts are just as valid from a comprehensive risk perspective. The current divergences and focuses capture the core character of today’s market.

The key reminder in my risk warning is the above analysis and risk alert. As far as I know, the Wallstreetcn column exchange group also notified everyone in real time, mainly to urge caution towards the current U.S. stock market.

Thank you for listening. Hope this helps. See you next time.

"Fu Peng Talks Season 6" comprehensive upgrade! Heavy launch!

Risk Warning and DisclaimerThe market carries risks; invest prudently. This article does not constitute personal investment advice, nor does it take into account individual users' investment goals, financial circumstances or needs. Users should consider whether any opinions, viewpoints or conclusions in this article suit their circumstances. Invest accordingly at your own risk. ```