Five terrifying signs we face biggest financial crash in years - it'll bury Labour

The last thing Chancellor Rachel Reeves needs right now is a global meltdown, but analysts warn she might get one anyway. Today's bull market looks overstretched and could soon come crashing down.

This wouldn't just be a correction. It could plunge the world into recession, wreck Reeves's budget plans and push the UK's finances to the brink.

Nobody can say for sure if the crash will happen. Someone somewhere is always predicting a meltdown. Yet five warning lights are flashing red.

1. Speculation is rampant. Investors are making wild bets. Late-stage bull market euphoria is rampant. Shares in Brera Holdings rocketed nearly 600% in a single day after announcing plans to buy crypto tokens. Then collapsed.

AI fever is driving the mania. Chip maker Nvidia has just pledged to invest a staggering $100billion into OpenAI, more than has gone into the entire AI sector in the past decade. Huge deals often signal the end of a boom, and the start of the bust.

The infamous $350billion merger between AOL and Time Warner in 2000 marked the end of the 1990s dot-com boom. Markets crashed by half in 2000.

2. Stock markets are at extremes. The US S&P 500 has doubled in five years and keep setting fresh highs. Even the normally sluggish FTSE 100 is flying. Japan's Nikkei has smashed records too.

The S&P 500 is now super-expensive in historical terms. Shares trade at 40 times average company earnings. That's way above the 32 times that heralded the 1929 Wall Street Crash.

The index has been pricier just once, briefly trading at 44 times earnings during the dot-com bubble in 1999. Markets lost half their value in the subsequent crash. The rise of algorithmic computer trading only adds to the risks of a sudden collapse.

3. Gold is surging. The gold price has doubled in five years to a record $3,772 (£2,795) an ounce, up 700% over two decades. Traditionally a safe haven in crises, its soaring price suggests investors are scared. Or chasing yet another bubble.

But gold is volatile too, and crashes when fear ebbs. That makes today's record run a danger sign in itself. Speculatory crypto-currency Bitcoin is close to its peak too.

4. Debt is out of control. It isn't just the UK drowning in debt. The US, France and Japan owe even more relative to GDP.

Global debt now equals 235% of world output, says the IMF, with governments the worst offenders. Bond markets are demanding higher yields to fund this excess. UK gilt yields are at a 27-year high as a result, upping the pressure on Reeves.

Western economies are living beyond their means. At some point, the bill will land.

5. Recession is looming. The US is close to recession as unemployment ticks higher and tariffs push up costs. Donald Trump wants the US Federal Reserve to slash interest rates. The Fed faces a grim choice: hold rates and risk a slump, cut and fuelling the inflationary bubble.

Either way, investors don't seem to care. They keep buying shares anyway.

The UK is on the edge too. Unemployment has jumped 0.5% this year to 4.7%, fuelled by Reeves's Budget tax on jobs. According to the tested Sahm Rule, a quick 0.5% jump signals recession.

It's a frightening scenario, but stay calm. Predicting a crash is easy. Saying when it will happen is impossible. Hedge fund boss Mark Spitznagel reckons euphoria could push the S&P 500 up another 20% to top 8,000, followed by a 80% wipeout, the biggest in history.

In truth, nobody knows. These things are impossible to predict. But the warning signs are clear.

For small investors years away from retirement, the best strategy is usually to stay invested and drip-feed cash into the market to pick up shares at lower prices.

Pensioners in drawdown don't have that luxury. For them, a crash could devastate savings. They should consider keeping funds on easy access, to tide them over the slump. In a stock market meltdown, cash is king.