Are US stocks forming a bubble? The answer depends on who you ask.
For Marko Kolanovic, chief market strategist at JPMorgan Chase & Co., the dramatic rise in U.S. stocks and Bitcoin’s rise above $60,000 are signals that the answer is yes. Kolanovic said the rise suggests a buildup of floss in the market, a typical precursor to a bubble in which asset prices rise at an unsustainable pace. View.
Alarm bells are rapidly ringing on Wall Street, recalling the internet stock boom of the late 1990s and the post-coronavirus frenzy in 2021, and Kolanovic agreed.
Meanwhile, Goldman Sachs Group’s David Kostin is among those who think the “risk-on” mood is justified, arguing that the high valuations of large tech stocks are supported by their fundamentals. do.
As the S&P 500 index continues to hit new highs, led by large tech stocks, pundits who think the bull market is short-lived are angry, while optimists who see further upside are excited.
Kolanovic, a key figure in the former group, said in a note to clients on the 4th that “volatility is low and floss is accumulating.” “Stocks have risen this year even as bond yields have risen and expectations for interest rate cuts have receded.Investors may have assumed that rising bond yields reflect an accelerating economy, but in 2024 “The market appears to be overly optimistic about this cycle, with earnings forecasts declining.”
By contrast, Goldman’s Kostin said in a note on Monday that this time is different from previous periods when stocks suddenly rose to levels that exceeded their value. This time around, the spread of stocks with “extreme valuations” has been much smaller, and the number of stocks trading at such multiples has fallen significantly from their peak in 2021, he said.
He added: “Contrary to the widespread ‘growth at all costs’ mentality of 2021, investors are generally paying higher valuations for the top growth stocks in the index. We believe the valuation is supported by fundamentals.”
The Magnificent 7 has soared this year, led by Nvidia, Meta Platforms, and Microsoft, and has been driving the rise in major stock indexes. In 2024, the S&P 500 set new highs 15 times. On a monthly basis, it has been at a high for four consecutive months.
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news-rsf-original-reference paywall">Original title:JPMorgan Sees ‘Froth’ in US Stocks, Goldman Says Rally Justified(excerpt)
2024-03-05 01:19:50
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