Despite the heavy concentration of the U.S. market rally in expensive, AI-focused tech stocks, analysts say Wall Street is not yet in bubble territory.
“The 90s bull run saw two phases: a broad, steady climb from early ’95 to mid ‘98, and then a narrower, more explosive phase from late ‘98 to early ’00,” UBS Chief Strategist Bhanu Baweja and his team said in the research note.
“Today’s sectoral patterns, narrowness, correlations, are similar to the second phase of the market; valuations are not far off either.”
Yet despite the surface-level similarities, Baweja argued that “there’s no bubble ready to go pop,” and pointed to notable differences in earnings, realized margins, free cash flow, IPO and M&A activity, as well as signals from options markets.
While sector-specific enthusiasm is evident today, UBS highlighted that it is not based solely on hype as was the case for much of the dotcom bubble, but on actual shareholder returns.
Click here for the full analysis on CNBC.
