Les Femmes d'Alger by Picasso
Asset prices are rising: Pablo Picasso's Women of Algiers sold for $179.3m earlier in MayReuters

As we begin to come to terms with and recover from the last financial meltdown in 2008, doom-mongers have already started forecasting the next one.

Predictions of a stock market collapse has been foretold by the likes of hedge fund managers Mark Spitznagel and Jeremy Grantham. And earlier in May, Janet Yellen, chair of the US Federal Reserve, warned stock market valuations present "potential dangers" because they are valued "quite high".

Even The Economist, the bible of neo-liberal economic theory, has started elliptically sending out warning signals to its audience of high-powered opinion formers and decision-makers. A recent issue took to task tax-free debt and its distorting effects on markets and risk-taking. It was a re-run of the 2008 crisis waiting to happen, opined The Economist.

House prices are also "quite high", not just in the UK but in several major global cities. As are the prices of numerous other asset classes, best illustrated by the sale of Picasso's Women of Algiers for $179.3m (£115m, €161m). Throw into the mix an overheated bond market and images of bubbles begin to appear.

House prices, bubble or no bubble?

UK house prices have risen 9.6% over the past year, buoyed by low interest rates and schemes such as Help to Buy, making it increasingly difficult for first-time buyers to get on the ladder.

Tony Dolphin, chief economist at the Institute for Public Policy Research, said: "For young people trying to get on the housing ladder it's impossible, but it doesn't yet feel like a bubble, at least compared to what we've seen previously."

Most observers point to a shortage in supply that is driving up prices, rather than an irrational over-valuation from purchasers. In addition, growth has been driven by London and the south east, while other areas have seen more stable rises.

One person who does not believe it is a bubble is Sam Bowman, deputy director of the Adam Smith Institute. He said: "It's not a bubble. Values are so high because of restrictions on construction. Prices are higher than they would be if there was more building taking place, so it's not the market that has got it wrong, it's an issue of policy."

Stock market bubble then?

The FTSE, Dow and Germany's Dax have all hit record highs in 2015, while the value of global equities has doubled since 2009 to stand at around $75tn. Alibaba, China's answer to Amazon, listed in 2014 for $25bn, while Facebook raised $16bn in 2012.

This is what prompted Yellen's comments and has caused concern among other observers about overvaluations leading to a crash akin to the dotcom bubble.

The dotcom crash started in 2000 and by the time it was over in 2002, the Nasdaq had plummeted 76%. The most stark illustration of just how bad things got was AOL's stock value plunging from $226bn to about $20bn. Verizon bought the company for $4bn, earlier in May.

Nevertheless, Bowman is unfazed. He said: "When people talk about equity markets being overpriced, what do they mean? Overpriced compared to what? Investors are not only looking at the present value of a firm, they are looking at its future prospects too, so they are pricing in growth."

Dolphin agrees, saying the equity market doesn't feel "outrageously overvalued".

Bouncing bonds

The market in government bonds has seen increased volatility, with a reported $450bn wiped off global bond markets in recent weeks. Investors fear bonds are overvalued and are fleeing the market.

Jenna Barnard of Henderson Global Investors said: "The high-yield market has been a perennial target for 'bond bubble' commentators in recent years.

"We haven't been subscribers to a superficial analysis, which expects the next downturn to be a carbon copy of the last."

Dolphin believes that what we are seeing is not a bubble bursting but a market correcting itself. He said: "The bond market as it stands is not sustainable, but I wouldn't get too worked up about it because it's in fact a market correction compared to where we were last year. There will be a gradual fall in prices and yields, but no big pop."

It's not like 2008, is it?

The key component of keeping the financial markets ticking along is economic growth. In the UK, the economy is growing, employment is rising and wage packets are finally getting bigger. The US is also seeing employment growth. This significantly lessens the chance of a crash, experts believe.

Bowman said: "A lot of these things are dependent on growth, which is not guaranteed. But it is likely there are lots of reasons to be positive on the growth front."

As for a crash, he adds: "We don't have any reason to think that there will be a crash. Markets are best predictors of the future, they have all the money in the game. Markets are not saying that everything is rosy, but nobody is talking or acting as though there will be a crash."