Back in February, with the S&P 500 breaching 7,000 for the first time, Owen Lamont was one of the few economists willing to say it plainly: we are not in a bubble. Four months later, he’s sounding the alarm.
“The chamber of dispersion has been opened,” Lamont, a senior portfolio manager at Acadian Asset Management and former finance professor at the University of Chicago, Harvard, Yale, and Princeton, wrote in his Owenomics blog this week—ahead of the massive SpaceX IPO. “The beast of volatility has awakened, and the season of chaos is at hand.”
The framework, now under pressure
Lamont’s bubble-detection system relies on what he calls the “Four Horsemen”: overvaluation, bubble beliefs, equity issuance, and investor inflows. In February, with companies still buying back roughly $1 trillion in stock and the IPO market eerily quiet, only three of four conditions were met. “I don’t see the smart money acting like there’s a bubble,” he told Fortune at the time. “Maybe I should say there’s not a bubble yet.”
The emphasis on “yet” was doing a lot of work. He warned that the missing horseman — issuance — could arrive at any moment. Indeed, Wall Street has been gearing up for a genuinely historic IPO pipeline. Blackstone’s CEO told the Financial Times early this year that it was shaping up to be “one of our largest IPO pipelines in history” and Goldman Sachs’ head of investment banking predicted to Fortune that there would be an IPO “megacycle” unlike anything before.
