S&P 500 Would Need To Surge By 25% To Match Dot-Com Bubble Level Of ‘Irrational Exuberance,’ Say Analysts: ‘No Doubt Concentration Is One Of The Biggest Risks’

    Date:

    Loading…

    Loading…

    The S&P 500 would have to soar by an additional 25% to replicate the “irrational exuberance” that fueled the 90s tech bubble, according to Societe Generale analysts.

    What Happened: Analysts Manish Kabra and Alain Bokobza at Societe Generale wrote in a note on Wednesday, reported by Business Insider, “Applying the peak of the [technology-media-telecoms] bubble maths to the Nasdaq-100, the S&P 500 would have to reach 6,250 to price in the same level of irrational exuberance.”

    At the peak of the dot-com bubble, the tech sector was trading at twice its profit share of the S&P 500, and the benchmark index had a price-to-earnings ratio of 25x. Currently, the Nasdaq-100 is trading at 1.25 times its share of profits (40% of S&P 500’s earnings per share), and the S&P 500 price-to-earnings ratio is 20x.

    See Also: Bitcoin, Ethereum, Dogecoin Surge Despite Hotter-Than-Expected US Inflation: Analyst Predicts Widespread Adoption Would Propel King Crypto To $600K

    Despite the S&P 500’s concentration in stocks like Microsoft, Apple, and Nvidia, analysts believe the current rally is driven by “rational optimism” rather than irrational exuberance.

    “There is no doubt concentration is one of the biggest risks,” Kabra wrote.

    “The index weights of the top 10 U.S. stocks are even higher today than they were in the [dot-com]-bubble.”

    Why It Matters: The current market conditions have been compared to the dot-com bubble by various analysts. In January, JPMorgan Chase & Co. analysts warned that the market was showing concerning signs of concentration, similar to the dot-com bubble.

    However, some experts, like Gene Munster, have dismissed the idea of an imminent bubble burst, suggesting that the current rally is the start of a 3-5 year tech run.

    Meanwhile, Capital Economics’ John Higgins has forecasted that the stock market bubble will continue to inflate until the end of 2025, with the S&P 500 potentially reaching 6,500 points by then.

    Read Next: Crypto Analyst Predicts Dogecoin To Kickstart ‘Memeseason’ With A Pump To $0.10

    Image Via Shutterstock


    Engineered by Benzinga Neuro, Edited by Kaustubh Bagalkote


    The GPT-4-based Benzinga Neuro content generation system exploits the extensive Benzinga Ecosystem, including native data, APIs, and more to create comprehensive and timely stories for you. Learn more.


    Loading…

    Loading…

    Go Source

    Chart

    Sign up for Breaking Alerts

    Share post:

    Popular

    More like this
    Related

    Imagine If We Could Annualize This Quarter…

    Many years ago, a very intelligent and experienced colleague...

    Waller Hawkishness Resists Accommodative Powell: Mar. 28, 2024

    Bond traders are reassessing their monetary policy expectations while...

    Hopping Into Q2 with Key Interim Data Events

    It has been a solid start to 2024 with...

    12,000 Calls Trade in Plains All American Pipeline, L.P. (Symbol: PAA)

    This morning over 11,800 January 17 ’25 calls traded...