The US stock market is on a rapid upward trajectory in 2024, with the S&P 500 Index breaking records multiple times this year. Companies such as Nvidia Corp. have seen significant increases in market value, raising concerns about a potential boom-and-bust cycle reminiscent of past market crashes.
Despite these worries, experts attribute the market’s strength to the resilience of the economy and strong corporate earnings. Investors are showing caution in certain areas, indicating that the market may not be in a speculative frenzy. The “Magnificent Seven” stocks, which have historically been bellwethers of market froth, are showing divergence this year, suggesting a reduction in overall market exuberance.
Additionally, the S&P 500 Equal Weight Index has reached a record high, indicating that gains are spreading beyond just the technology sector. Limited interest in new IPOs further supports the idea that market sentiment is not overly euphoric.
While tech stock valuations are stretched, they remain below previous peak levels. The top five S&P 500 stocks are trading at significantly lower multiples compared to top stocks during the dot-com bubble of the early 2000s. Valuations in specific tech sectors such as AI and robotics are also contained and below their long-term averages.
Overall, while the rapid rise of US stocks in 2024 may be cause for concern, signs indicate that the market may not be in a speculative bubble like in previous years. Investors are exercising caution and diversifying their portfolios, suggesting a more stable and balanced market environment.
