[Note: This material is for education or entertainment only. It does not constitute investment advice of any kind. See a licensed investment professional for investment advice.]

In the last fifty years, stock market expansions were driven by developments in technology half the time, and periods of excessive leverage every time. Today’s continued market expansion (featuring regular new highs amid inflation, global turmoil, and a deficit that has already increased by 1.5 trillion in only six months), is the answer to the riddle–borrowed from J. R. R. Tolkien and The Hobbit. The traditional answer is a human: it first crawls on all fours, then learns to walk on two, then uses a cane later on.

This market is using a cane.

The chart above shows the NASDAQ 100 ETF “QQQ” doubling in the last three years. AI is the new technology, but leverage is also present. Record option activity is still driving stock prices higher with wild bullish bets that last only 24 hours.

In December, the Fed abruptly went from shrinking its balance sheet to expanding it. Why? There needs to be another riddle?

What can go from walking with three legs to four in the duration of a month?

–The answer is the same: The Market.

WRH