In today’s briefing:
- Stock Market Watch: Time to Call off the Recession?
- Is This a Valuation Bubble? Comparing the Dot-Com Boom to the AI Hype
- BoE: Gone With The Wind
Stock Market Watch: Time to Call off the Recession?
- Breadth is improving. Speaks for short-term momentum, but fundamentals haven’t yet turned.
- It may be too soon to exit, but (soon) too late to board. Short-term momentum, yes, the next economic expansion, certainly not.
- The market seems to be underestimating the ‘higher for longer’.
Is This a Valuation Bubble? Comparing the Dot-Com Boom to the AI Hype
- The valuation of Global and US Tech stocks is at extreme levels and are, by some metrics, more expansive than during the height of the Dot Com Bubble.
- Earnings and sales growth are remarkably comparable to 1998 – April 2000, and investors are extrapolating these growth numbers too far.
- On the other hand, the price performance of technology stocks does not resemble the rapid ascent witnessed during the Dot Com period at all. Yet, the downside risks are substantial.
BoE: Gone With The Wind
- The BoE hiked by 50bps in Jun-23, contrary to widespread expectations for a 25bp step. Moreover, most other economists initially saw no more hikes after the May decision.
- We didn’t see the macroeconomic news as worth this shock, and the minutes failed to explain the massive change. Public criticism appears to have blown the market and BoE.
- Further rate hikes in August and September remain likely. We expect those to be 25bps steps, but the BoE is losing its grip and encouraging hyperactive data dependence.
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