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***TLDR****: during dot com, I forced myself to memorise the signs of a bubble: ipo, m&a, excessive valuation and I think the last was the rush of retail investors. This article reminds of that era.*
Surging IPO activity is one of the four horsemen of a market bubble, according to this portfolio manager - MarketWatch
IPOs, like bananas, need time to ripen, investor says
By Jules Rimmer and Christine Idzelis
Updated July 23, 2026, 11:37 a.m. ET
https://www.marketwatch.com/story/surging-ipo-activity-is-one-of-the-fourhorsemen-of-a-market-bubble-according-to-this-portfolio-manager-35a1ab02
\- U.S. initial public offerings have are running at a record pace halfway through 2026, raising questions over whether the surge represents a market bubble.
\- Apollo Global Management’s Torsten Slok said IPOs since 2019 have underperformed the broader stock market over the following three years.
\- Acadian Asset Management’s Owen Lamont warned that surging equity issuance is one of the four horsemen of a market bubble.
\[missing picture of The four horsemen of the market bubble: surging inflows, overvaluation, bubble conviction and excess issuance.\]
Is the surge in initial public offerings a red flag for investors? As U.S. issuance hits a record high only halfway through 2026, that’s a debate ongoing in the market right now. It was also the question that was put to three U.S. strategists by Goldman Sachs in the occasional “Top of Mind” report published Wednesday.
Ben Snider, Goldman Sachs chief U.S. equity strategist; Jay Ritter, director of the IPO initiative at the University of Florida’s Warrington College of Business; and Owen Lamont, senior vice president and portfolio manager at Acadian Asset Management, were asked whether the IPO wave was flashing a “late-cycle warning sign” and, if it was, “whether the market can comfortably digest so much new issuance?
Of the trio, it was Lamont who was most concerned. He accepts that higher equity issuance may simply reflect the capital demands of a transformative technology like artificial intelligence. But he also points out that “past bubbles have often been fuelled by new technologies and have followed issuance and capex waves, as corporates tend to sell equity when they believe it’s over-priced.”
Lamont has his own definition of “The Four Horsemen of the Market Bubble.” It’s a trope dating back to the dot-com boom of 1998-2000 when the label was affixed to a quartet of stocks: Microsoft, Cisco Systems, Intel and Dell.
Lamont’s updated version, however, cites overvaluation, bubble beliefs (whereby investors “know” stocks are overvalued but buy them anyway because they think they will go up further), equity issuance (when corporates aggressively exploit high valuations to sell equity) and surging inflows.
The current issuance wave represents at least one of those horsemen, but Lamont is keen to stress that “IPO waves can last for years so they may mark the beginning of the bubble rather than the end.” The scarcity of extreme first-day pops on IPOs encourages Lamont that speculative euphoria may be absent at present.
Lamont is also cognizant of the fact that the issuance story includes debt, too. Goldman Sachs’s chief credit strategist, Amanda Lynam, has also cautioned about the risks posed by market saturation and issuer concentration.
Moderating the conversation among Ritter, Snider and Lamont, Goldman executive director for global macro research Jenny Grimberg emphasizes that, regardless of whether IPO issuance is a warning or not, it’s a reality that IPOs tend to underperform in the first few years. Lamont’s recommendation, therefore, is to exercise patience: “IPOs are like bananas: \[T\]hey need to ripen before they’re ready to eat.”
Another aspect of the issuance troubling Lamont is that some major index providers — like Nasdaq with SpaceX recently — are including large IPOs much earlier than before. Lamont views this development disapprovingly.
Snider and Ritter are more sanguine. Snider compares the size of the U.S. equity market (the overall market capitalization of U.S. stocks is about $75 trillion) with the $700 billion of corporate issuance he expects this year. Let’s face it: It’s a drop in the ocean. Snider also argues that there’s a “self-limiting dynamic” to IPO issuance: If the demand isn’t there, the deals won’t come.
Many of the IPOs these days are far more profitable than companies going public in the past have been, the report shows.
Ritter acknowledges high new-issuance volume has been a past predictor of lower market returns but derives comfort from the $1.6 trillion of cash U.S. corporates have returned to investors in recent years via buybacks and dividends. The markets are absorbing a fraction of that available capital.
IPOs underperform since 2019
As initial public offerings surge in the U.S., Apollo Global Management is cautioning that they’ve broadly lagged the stock market in recent years.
Apollo’s chief economist Torsten Slok said in a note Thursday that since 2019 IPOs have underperformed the broader market over the following three years, pointing to peak valuations, a “hostile” interest-rate regime and lower-quality companies going public against “a high bar” as driving forces. He cautioned that elements of these forces could continue playing out.
“The 2020–2021 wave came public at rich multiples amid zero rates, stimulus and speculative retail demand, leaving little room for gains,” wrote Slok. And then the Federal Reserve’s rate-hiking cycle from 2022 “compressed valuations and hit the long-duration, unprofitable growth stocks that dominate IPO cohorts hardest.”
So far this year the Fed has kept its benchmark rate steady, but traders in federal-funds futures have been pricing in a potential rate hike by year-end amid worries over inflation pressures. Meanwhile, the bull market in U.S. stocks has carried on in 2026, with SpaceX recently pulling off a record IPO in June as investors anticipate other blockbuster offerings.
For example, OpenAI and Anthropic have filed for IPOs amid an artificial-intelligence boom that has helped propel big gains in pockets of the market this year, such as semiconductors stocks. The U.S. stock market is up so far in 2026, although chip stocks have recently given up some of their parabolic gains.
The underperformance of IPOs since 2019 had partly to do with the booming environment pushing “marginal companies public before they were ready while the market-adjusted benchmark was set against an index carried by a handful of mega-cap winners,” Slok wrote.
The S&P 500, which has heavy exposure to top-tier tech companies, has climbed 9.5% this year through Wednesday, according to Dow Jones Market Data.
So far in 2026 the Renaissance IPO ETF, an exchange-traded fund that seeks to provide exposure to recent IPOs in the U.S., is beating the S&P 500. The fund, which rebalances quarterly and does not currently hold SpaceX, has surged 17.5% this year through Wednesday.
Shares of SpaceX in recent sessions have been trading below the level of their public debut.
The company’s stock ended Wednesday at $115.26, nearly $20 below the IPO price of $135. While SpaceX shares had shot up in their first day of trading on June 12 to finish the session at $160.95, the stock is down about 28% since then through Wednesday, based on FactSet data.
In Slok’s view, the driving forces behind the underperformance of IPOs since 2019 could persist today. “Valuations may re-inflate in the next IPO window, rates look set to stay structurally higher than the 2010s and index returns remain concentrated in a few mega-caps that keep the relative bar high,” he said in his note.