‘It better be different this time’

• AI optimism exceeds DOT-Com levels by directing the S&P 500 price-book ratio to records.

• High values reflect expectations for AI -guided gains.

• The ratio level does not require that stocks be in a bubble while dizzy.

The stock market bulls convinced AI’s power to transform the economy, usually a quarterly century ago comparisons shrugged shoulder. Unlike the first days of the internet explosion, the real profit is already emerging – so that This time different, thought goes.

However, Bank of America strategist Michael Hartnett has a message to these investors: “This time it would be different.”

Hartnett, who has frequently expressed skepticism of the market for the bull work of the market for the last few years, shared a dizzying chart emphasizing how optimistic the investors have become about the effect of AI. It shows the price-book ratio of the S&P 500, which measures the total market value of the index components compared to its total assets.

The valuation measure is at the 5.3 record level at the top of the Dot-Com balloon at the level of 5.1, which was seen in March 2000.

Other classic valuation measures show the market bridge according to history. For example, Hartnett also shared a graph showing the 12 -month advanced price / earning rate of S&P 500. Apart from August 2020, the highest level since the Dot-Com period.

And the shills are similar to 1929, 2000 and 2021, which measures the current prices against a 10 -year average earnings average.

High values reflect high expectations for future gains. Sometimes these expectations rise very much and prices are correct, but they do not require a balloon scenario. So far, many AI companies have constantly met the expectations of earnings, which made it think that optimism could be right.

Valuations are also better predictions of average long -term returns than close -term performance, and the views in the Wall Street are different where the market goes in the coming months. Although there are calls for attention, many strategists continue to increase the S&P 500 price targets.

At the beginning of this week, Rick riederThe Chief Investment Officer of the global fixed income in Blackrock said that thanks to factors such as strong demand for the market’s stocks, approaching ratio interruptions and recent increases in productivity and earnings growth, it is “in the best investment environment so far”.

However, if the market begins to relax, Hartnett said that it benefited from bonds and non -US stocks. Ishares Core US total bills ETF (AGG) and Vanguard FTSE All World Ex-EBD ETF (Veu) are examples of funds that propose to exposure to these operations.

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