The real problem is continued socialization of risk when the inevitable bailouts come. The government is basically telling everyone to take crazy risks, because if the risk is big enough, we'll bail you all out.
This is the widespread sentiment, yes, and why the bubble is so crazy. The feeling a lot of people have is; even if shit hits the fan, rather than let stocks/assets decrease in value relative to cash, governments will just print money and keep stocks/assets "stable" while making cash worthless. The US proved they're willing to do this during COVID. What you're betting on by holding assets despite the bubble is that they're willing to do it again.
Watch what happens if a breakthrough comes out of China, Russia or a shed in Nigeria. What is happening on Wall Street or who is loosing cash or jobs will drop instantly down the list of priorities. Money will be printed to the moon.
Of course not, but with the Fed always standing at the ready to print more money, the answer is yes. The downside is persistent inflation. Inflation and default are two sides of the same coin.
It's really a shame that it's really the regular people who are going to suffer the majority of the harm when this bubble pops, as the Wall Street insiders get off mostly scot free yet again but I really don't want the government trying to prop up these assholes again.
The problem, of course, that no one wants to take a lower return on investment.
Let's say you heard Trump's talk of tariffs, got spooked when he won the election, and moved your investments. The S&P 500 has gone up ~33% since election day. How much growth can you realistically miss before correctly hedging against a crash still net loses you money?
And that's assuming you pick the correct hedge. If the US economy well and truly crashes beyond return, to the point where the S&P 500 is actual garbage that will not recover in the next 5-10 years, that might bode poorly for the dollar, so that's it for your treasuries, money market funds, CDs, etc. Gold is always an option, until it's at an all time high because just as the economy is roaring along a ton of people are nervous. So, you can invest in gold, but it's expensive, which means it could actually dip if we get stability. Ok, so you invest in foreign markets - but the Global Financial Crisis was global, the Great Depression was global, everything was global.
What do you actually hedge in? Oil? Well, the rapid development of green energy might actually, finally render that an unsafe investment. Green energy? Think again, the president is on a crusade against it. There's literally nothing that's actually a safe investment, and even if you did find a safe investment, the big crash might not happen until everyone else riding the wave has doubled or tripled their investment, by which point they'll be on par or even above you post crash. I'm actually very happy I'm nowhere near retiring, since regardless of how else you feel of the current governing of the US, I think it would be hard to argue that they're fighting a war against conventional wisdom, and that makes investing very scary.
Don't forget that bubble popping doesn't necessarily mean that the sector is dead. The Dot Com bubble popped but people are still selling things on websites. It just means the hype and unrealistic expectations come crashing down to Earth. AI is going to be with us from now on, but it won't become a God with unlimited productivity next year.
The way people in the US government has been speaking and acting goes against that hope. Instead, it seems to be unanimous that AI will be the foundation of the economy, the US can't lose its leadership on it for even a second (because when it takes over, it will take over in a second), and it's worth breaking every rule, spending every cent to keep, and cannibalizing every other industry if necessary.
Honestly, you have to deal with the delusional con-man in power ASAP.
They are no1 to stop banks collapsing and no2 sometimes to try to stop unemployment going up too much.
Presuppose everything else that contributed to the GFC was straight up fraud: Prevent it all and the crisis is basically just as bad.