美股不會再跌了？高債務時代的「大融漲」陷阱

Original title: Hitting escape velocity in the Great Melt-up

Original author: GRAHAM STEPHAN

Original translation: Peggy

Editor's note: This article starts with a viral (and now deleted) Reddit post, discussing an increasingly tempting thesis in the current US stock market: With high national debt, expanding fiscal deficits, and continuous dilution of purchasing power, has the stock market entered a state where it "truly cannot fall"?

The logic of the Reddit post is simple: The US debt is too large, and the government's only eventual solution is to print money and inflate its way out. When currency depreciates, dollar-denominated stocks and hard assets will rise accordingly. Therefore, stocks are no longer just risk assets; they become a haven against currency debasement.

The author analyzes this thesis within the framework of "The Great Melt-up" – the final accelerating phase driven by liquidity, momentum, and FOMO, detached from fundamentals. Historical examples like the Dot-com bubble and Japan's asset bubble show similar moments: new technology or real growth provides a narrative, then leverage and emotion take over, and investors start believing old valuation rules are obsolete.

The key reminder is that a high-debt world does favor assets over cash, but this does not mean stocks are "mathematically incapable of falling." Inflation can boost nominal asset prices without creating real wealth. The stock market can hit new all-time highs while experiencing 30%, 40%, or even deeper drawdowns along the way. In extreme historical inflation cases like Germany, Zimbabwe, and Venezuela, stock market gains did not equal real wealth for investors; many were forced to sell assets just to cover living costs before prices recovered.

The author's final judgment is not extreme: The US is more likely to experience a prolonged period of financial repression – inflation slightly higher than interest rates, debts gradually diluted, cash purchasing power steadily eroded, and asset prices rising nominally while real returns may be lower than what investors got used to over the past decade.

For investors currently drawn to the narrative of AI, US tech stocks, and "every dip gets bought back," this article isn't about whether to be bullish or bearish on US stocks. It's about avoiding betting your entire financial future on a story that seems too smooth. Assets can rise without risk disappearing; markets can be rescued, but not everyone can hold on until the next new high.

Here is the original article:

This might sound crazy, but what if I told you that, mathematically, the stock market might never go down again?

Last week, a post on Reddit suddenly went viral, making a rather compelling argument. Although it was deleted after gaining traction, its gist was this: "Stocks only go up" is no longer just a meme, but a law. Like gravity, but reversed, and applied to money.

The US now owes $40 trillion in debt. Our interest expenses will soon exceed GDP. This means that just to pay the interest, the government's only option is to print enough money.

This will lead to hyperinflation. But if you hold Palantir or Tesla stock, who cares? These stocks will inflate proportionally too. This means, from now on, stocks are mathematically incapable of falling. If they did, the entire world economy would collapse.

That's why any "crash" you see gets fixed within half a trading day. The stock market, literally, cannot go down. This isn't a deathbed boast; it's a new market law.

This isn't the first time such a view has appeared, but this time, the economic environment truly warrants serious consideration. So we need to discuss clearly: What is happening now, why the government is forced to print money on an unimaginable scale, and what the consequences would be if this theory holds.

Because if it's right, we might witness the largest wealth transfer in history. If it's wrong, it's a harvest.

Before we begin, if this is your first time reading my article, welcome to join over 40,000 subscribers who get market insights early. You'll receive a weekly email, completely free.

The Great Melt-up

The idea that "stocks only go up" is built on what economists call "The Great Melt-up" theory.

The logic is that every bull market keeps rising until it enters a phase of frenzy. Prices are no longer driven by fundamentals like earnings or cash flow, but almost entirely by momentum. At this stage, it feels like everyone around you is getting rich, and you're the only one being left behind.

The belief is simple: Prices will keep rising because they have been rising so far.

This phenomenon is less rare than you might think. During a "melt-up" phase, returns can be spectacular until it suddenly stops being true.

Take the Dot-com bubble of the late 1990s. From 1995 to March 2000, the Nasdaq rose 400%, with nearly 90% of that gain in the final year alone. At the time, companies with no revenue, no profit, and sometimes no real product could achieve valuations in the hundreds of millions.

In December 1999, the CAPE ratio reached 44, a 140-year high. Investors believed the internet had changed the rules of the market. "AI will change everything." Sound familiar?

Then, the Nasdaq crashed 78% over the next two and a half years and took over a decade to return to its peak.

Consider Japan. Between 1975 and 1989, Japanese stocks rose 900%. At the peak, the P/E ratio of the Japanese stock market hit 60 times. Tokyo land prices became absurdly expensive: The land under the Imperial Palace was considered more valuable than all the land in California.

This was clearly ridiculous, but no one wanted to be the first to leave and miss out on further gains. When Japan started raising interest rates, the whole economic system collapsed, and the stock market fell 60% in less than two years. It took the Japanese economy 34 years to finally return to its former peak.

However, this doesn't mean every rally is a melt-up.

Every melt-up's early stage is usually driven by some real factor: new technology, genuine economic growth, or a different policy environment. But when FOMO and leverage enter the market, valuations get stretched higher and higher, and everyone starts believing the good times will never end.

So, are we in a melt-up today? We first need to look at the stock market in 2026.

The Melt-up Theory on Reddit

The core of this Reddit theory is debt.

If the US government owes $40 trillion in debt and is generating a $2 trillion annual deficit, how exactly can the US get out from under this debt without destroying the economy?

The easiest path is to dilute the debt through inflation. The dollar's purchasing power falls until the $39 trillion debt becomes, in real terms, less burdensome. This tactic is called "financial repression" because it erodes the wealth created by ordinary people. The US government used a similar approach after World War II.

But when a government devalues its currency, everything priced in that currency rises: stocks, hard assets, they all look more valuable on paper. The problem is that these paper gains don't equal an increase in real wealth because the dollar itself is worth less.

So, when Goldman Sachs recently raised its year-end target for the S&P 500 to 8,000 points, even if that prediction comes true, it might not simply be good news.

The alternative to infinite upside is a real stock market crash. But no one would be crazy enough to actively choose that path.

However, what's truly unsettling are these numbers: By almost all major valuation metrics, US stocks are not cheap. In fact, the price investors pay for each dollar of earnings is near an all-time high, roughly double the long-term historical average.

The CAPE ratio has only broken 40 twice in history. Once during the Dot-com bubble of 1999, and right now.

In other words, the current market isn't just pricing in a debt-driven melt-up; it's exhibiting a state seen only once before in 140 years of market history.

So, how do we determine whether the "Great Melt-up Theory" will hold or collapse?

The Crash Test

Some claims in that Reddit post need closer examination.

First, interest expenses will soon exceed GDP – this is incorrect.

What exceeds 100% is the debt-to-GDP ratio, not the interest expense-to-GDP ratio. These are not the same thing. Historically, the US has faced similar situations and emerged by "printing money," pushing markets to recover and rise further.

Second, the only way to pay interest is to keep printing money – this is also incorrect.

The government can also sell treasury bonds to borrow from investors, pensions, other governments, and institutions. Of course, this model cannot last forever.

Third, stocks rise proportionally with hyperinflation – this is also incorrect.

Historical experience does not support this. Between 1918 and 1922, the German stock market lost 97% of its value before hyperinflation even peaked. Many were forced to sell stocks at the bottom just to pay rent and buy food.

In Zimbabwe, the stock market did rise 500-fold, but the local currency fell 99.8% against the US dollar. Venezuela experienced a similar situation in 2018.

So, what you really need to understand is: The Great Melt-up is not necessarily a blessing for stock holders.

Stocks can rise during inflation, but that doesn't automatically make you richer. If your portfolio goes up 10%, but everything you buy also becomes 10% more expensive, you haven't actually gained anything.

Given this information, what should we actually do?

The Exit Plan

History tells us the most likely scenario is: The US will not default on its debt, will not experience unprecedented hyperinflation, and will not see endless money printing due to treasury issues, driving the stock market into an infinite melt-up.

A more realistic outcome is a long, slow period of financial repression: inflation slightly higher than interest rates, debt becoming more manageable, and the dollar's purchasing power gradually falling below past levels.

The cost is that savers will be quietly squeezed. Cash loses value, prices continue to rise, asset prices in dollar terms keep going up, but real returns after inflation could be significantly lower than what investors have been used to over the past decade.

For the stock market, prices will likely continue to trend upward in the long run because when the dollar's purchasing power falls, nominal asset prices usually rise.

But a long-term uptrend doesn't mean the market won't crash along the way. The market could still fall 30%, 40%, or even 60% from current levels. But it could also hit new highs later.

These two seemingly contradictory facts can both be true at different times: The market is expensive, and one event could trigger a 20% sell-off. Nothing is risk-free. On the other hand, high debt doesn't necessarily mean high inflation, nor does it mean the stock market will be continuously propped up. Most importantly, you shouldn't base your entire financial future on the hope that "the next bailout will definitely happen."

In my view, that Reddit post was right in direction but misunderstood the path to the outcome.

In a high-debt world, governments do have a strong incentive to let inflation bear the main pressure. Over a long enough time horizon, this typically favors assets over cash. But that absolutely does not mean "stocks are mathematically incapable of falling." That is a dangerous assumption.

This assumption leads people to rush into every market frenzy, thinking it's their last chance to get rich. They buy at extreme valuations, with no margin of safety, no diversification, and no plan for what markets have repeatedly done: decline.

I'm not predicting a crash here. Many very smart people think the market can continue to rise.

But historically, those who ultimately come out ahead during inflationary periods are usually not the ones who bet everything on the most expensive, highest-multiple stocks. The winners are often those who hold a set of productive assets: stocks, real estate, some cash, perhaps some gold and short-term bonds, and who aren't forced to sell when things get bad.

In a high-debt world, stocks might outperform cash in the long run. But that could also mean your portfolio sees almost no real growth for 10, 15, or even 20 years after inflation.

So, instead of relying on your willpower to endure decades of stagnation, it's better to build a system where you don't have to treat "hope" as an investment strategy.

In summary, the answer is not panic, nor is it selling everything. But the answer is also not going all-in, using leverage, and assuming every dip will be bought back.

This is a highly emotional period, and you might be tempted to bet everything on what seems like a "once-in-a-lifetime opportunity." But risk is always a two-way street.

I believe the better choice for most people is to maintain a diversified portfolio, not to be overly concentrated in the most expensive stocks. Keep enough cash so you are never forced to sell at the worst possible time.

Most importantly, please do not base your entire financial future on a viral Reddit post.

Stick to your regular investment plan, and stay diversified. If you found this article helpful, feel free to like, share, or send it to someone you don't want to be left behind by the market.

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