Wall Street Analysts Brush Off Stock Bubble Fears Amid Magnificent 7's Surge
Experts Predict Continued Market Momentum Despite Concentration Concerns
As the S&P 500 skyrockets by nearly 25% from its October lows, driven mainly by a few stocks, concerns over a potential stock bubble are surfacing.
Nvidia (NVDA), a popular AI choice, leads the charge with an over 80% surge since the year began, propelling both the S&P 500 and Nasdaq to record heights.
Market concentration hits an all-time high, with the ten largest US stocks representing 33% of S&P 500 market cap and 25% of its earnings, according to Goldman Sachs data.
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However, some top Wall Street analysts argue that fears of a bubble are unfounded. Drew Petit, Citi's US Equity Strategy Director, calls it a "sell-side trick," suggesting the market is healthier than perceived.
Tech giants like Nvidia, Meta (META), Microsoft (MSFT), and Amazon (AMZN) have delivered strong quarterly results, reinforcing bullish sentiments. Analyst Dan Ives compares the current market scenario to 1995, highlighting substantial profit margins and returns.
Chris Danely, head of US semiconductor research at Citi, shares this optimism, foreseeing no end in sight for tech's upward trajectory.
Underlying trends also paint a positive picture, with market breadth slowly improving. Liz Ann Sonders from Charles Schwab notes a subtle broadening out in the market, indicating bullish sentiment beneath the surface.
Goldman Sachs' analysis over the past century suggests that periods of heightened concentration often precede market rallies. Analyst Ben Snider emphasizes the likelihood of laggards catching up rather than current leaders reversing course.
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