Lamont's Four Horsemen: Why Early 2026 Isn't a Bubble (Yet)

The Early 2026 Landscape

The dawn of 2026 finds global markets operating in a state of effervescent confidence, a cocktail of robust corporate earnings and forward-looking sentiment that has pushed asset valuations to dizzying heights. Benchmarks across equities and specialized tech sectors frequently test historical peaks, leading to a palpable sense of exuberance among investors. It is against this backdrop of surging optimism, as chronicled by financial observers, that whispers of a potential asset bubble have begun to circulate more loudly than usual in the elite corridors of Wall Street. Financial commentary, often reflecting the anxiety underlying high returns, has started to seriously engage with models designed specifically to identify when market fervor crosses the line from aggressive growth into unsustainable mania.

This prevailing atmosphere, while undeniably dynamic, forces a crucial distinction: high valuations do not automatically equate to a terminal bubble. As reported by @FortuneMagazine, many sophisticated analysts are reserving judgment, preferring established analytical frameworks over knee-jerk declarations of imminent collapse. The central question facing portfolio managers today is whether the current environment represents a prolonged, powerful economic expansion or the final, dangerous stage of speculative excess.

Lamont's Framework: Defining the 'Four Horsemen'

The benchmark for dissecting contemporary speculative cycles often points to the proprietary methodology developed by Dr. Elias Lamont, a framework renowned for its predictive accuracy across several past market peaks. Lamont’s model eschews simple P/E ratios, focusing instead on four distinct, co-dependent variables—the titular "Four Horsemen"—that must align for a true, systemic bubble confirmation. If even one element is missing, the market is deemed "dangerously elevated," but not yet in the terminal stage.

The framework is elegantly simple yet brutally comprehensive:

1. Overvaluation: Prices detached from underlying fundamental cash flows or replacement costs, suggesting speculative premiums dominate intrinsic worth.
2. Bubble Beliefs: Widespread conviction among the public and retail investors that "this time is different," driven by narrative rather than historical precedent.
3. Inflows: Massive, sustained net capital flows into the asset class, often driven by passive strategies or late-stage euphoria.
4. Issuance: The rapid, almost frantic, creation and distribution of new securities—IPOs, SPACs, complex structured products—to meet speculative demand.

Lamont posits that a confirmed, explosive bubble requires the synchronized presence of all four signals reaching critical thresholds. Without the final element, the system remains pressurized but structurally incomplete for a full-scale eruption.

Analyzing the Present Cycle: The Triumvirate of Concern

In the context of early 2026, observers confirm that the first three riders are already fully engaged. Overvaluation metrics, particularly when viewed through a forward-looking lens incorporating discounted future earnings, are flashing cautionary amber, exhibiting readings comparable to the late 1990s and 2007 peaks across several key indices. Simultaneously, Bubble Beliefs are deeply entrenched. Anecdotal evidence abounds: from mainstream media coverage championing "guaranteed growth" narratives to the confident adoption of increasingly esoteric investment vehicles by novice participants, the conviction that traditional valuation anchors no longer apply is pervasive.

Furthermore, Inflows into high-growth segments remain relentless. Despite elevated interest rates intended to cool lending, dedicated pools of capital—both institutional and retail via zero-commission platforms—continue to pour money into perceived winners. This sustained momentum, as seen in monthly data tracking managed fund flows, is a classic sign of late-cycle behavior, where fear of missing out (FOMO) overrides disciplined risk assessment. The historical significance of this triumvirate being present concurrently cannot be overstated; it signals a market that is primed, exceptionally sensitive to shocks, and running hot on pure momentum.

The Decisive Factor: The Absence of Issuance

The primary factor that deflates the "confirmed bubble" diagnosis for early 2026, according to Lamont’s metric, is the striking absence of the fourth horseman: Issuance. In a true speculative mania, the sheer volume of capital seeking deployment triggers a corresponding supply response. This manifests as a surge in Initial Public Offerings (IPOs) across all sectors, unprecedented creation of complex derivative products, and a general loosening of listing standards as companies rush to monetize peak valuations.

As of the first quarter of 2026, however, primary market issuance remains notably subdued relative to the valuation peaks. While high-quality, established companies are certainly accessing capital judiciously, the floodgates for speculative, pre-revenue, or unprofitable entities to go public have not opened wide. Lamont considers issuance the "linchpin" because it represents the direct conversion of market sentiment into committed, non-reversible capital allocation. When companies feel confident enough to sell their inflated equity to the public—thus crystallizing the paper gains—that marks the moment market froth becomes systemic liability. The lack of this massive issuance wave suggests the market has not yet reached the consensus point where every available entity believes it can cash in at current levels.

Implications: Why 'Not Yet' Differs from 'Not a Bubble'

The distinction between a market showing three of the four indicators versus all four is critical for risk management, not comfort. A market characterized by intense overvaluation, strong belief, and heavy inflows is inherently fragile. It possesses massive latent downside risk, meaning a significant, unexpected shock—a geopolitical event, a regulatory crackdown, or a surprise earnings miss from a major leader—could trigger a sharp correction.

However, a confirmed bubble implies an almost mathematical certainty of a painful, widespread liquidation phase, driven by exhausted capital looking for an exit via the primary issuance channels. Currently, the market is exhibiting characteristics of extreme gravity before the final necessary push off the cliff. Investors must understand that "not yet" does not translate to safety; it implies that the market is in a state of critical suspension, where a single catalyst could rapidly introduce the missing fourth element and send valuations spiraling down.

Forward Outlook: Watching for the Fourth Rider

The immediate mandate for market observers is clear: monitor issuance volume with granular intensity over the coming quarters. Any sudden acceleration in IPO filings, particularly from highly speculative or nascent technology firms, should be treated as a definitive warning signal that the Lamont framework is about to align fully. Investors should scrutinize whether corporate boards, sensing peak sentiment, begin aggressively testing the appetite for new equity supply.

The current environment is a paradox: one of tremendous opportunity underpinned by alarming structural risk. While Dr. Lamont’s analysis provides a vital analytical scaffolding, it also serves as a sober reminder of how quickly market dynamics can shift. Until the fourth horseman—the flood of new supply eager to meet demand—arrives, the market remains dangerously overheated, yet technically intact. The story of late 2026 may well be written by the speed at which that final element materializes.

Source: Fortune Magazine on X