Let the wild rumpus start: is the US facing a stock market ‘super-bubble’?

The tech sector led US stock markets on a pandemic boom last year. Now markets are whipsawing on fears that the Federal Reserve will end the era of easy money, all while a potential war in Ukraine looms. Some warn of a bigger correction to come on a scale not seen since the dotcom collapse of the late 1990s.

On Monday, US stock markets crashed then rallied. The Dow Jones at one point lost more than 1,000 points before ending up just over 100. Tuesday was more of the same with the Dow losing 800 points only to gain most of it back. Analysts expect more volatile days ahead. The Fed on Wednesday issued its latest update on its plans to raise rates in order to curb inflation, and the world's largest tech firms are preparing to issue their latest results to investors, who appear to have grown more skeptical about their prospects.

Jeremy Grantham, the British co-founder of Boston-based investment manager GMO, believes the US is now in a "super-bubble" comparable to the dotcom era, the Wall Street crash of 1929, and the housing market madness of 2006. It is not just tech that has blown up, but housing prices, commodities and bond prices.

The "wild rumpus" has begun, according to Grantham. It is unlikely to end soon.

The latest test of investor resolve came on Tuesday when Microsoft released its quarterly results. The Seattle-based tech giant announced sales topping half a billion a day and a profit of more than $18bn. Huge numbers, and better than expected. Its shares initially fell 5% in after-hours trading.

Microsoft will be followed by Apple, Tesla, Intel and Samsung this week, with more to come from Alphabet, Amazon and Meta next month - a litmus test for a newly acid view on a sector that now dominates the stock markets and much of daily life.

Already one of the pandemic's winners has shown how much the mood has changed. Netflix, which boomed during the pandemic lockdowns, saw its share price collapse after a disappointing earnings result last week that predicted a slowdown in subscribers.