GenZ fashion influencers aren’t the only ones trying to channel the 1990s these days. Investors likewise see plenty of current-day relevance in that decade of upheaval, renewal, technological acceleration and eventual excess. The main stock-market argument now raging among the orneriest bears and giddiest bulls hinges on what year of the ’90s best matches up with 2024. The market skeptics are busy flagging what they see as parallels between today and 1999, the year the ’90s bull market went parabolic and sentiment came unhinged, building the behavioral and valuation excesses that culminated in the early-2000 peak and subsequent multi-year collapse. The believers in the staying power of the current bull market place us in 1995. This year glows bright in the annals of economic history for its flawless soft landing, when an aggressive Federal Reserve tightening campaign in 1994 gave way to a brief but mostly painless slowdown, followed by modest rate cuts, a reacceleration, a productivity revival and five years of stellar stock-market returns. Nvidia vs. Cisco ’99 The inescapable dominance of a half-dozen Nasdaq giants in driving the S & P 500 above 5000 for the first time by Friday is the central focus of the “1999 redux” crowd. Charts overlaying today’s steep and unflagging surge in Nvidia on that of Cisco Systems from the late-’90s have been circulating for months. Last week, JP Morgan strategist Marko Kolanovic argued in some ways the extreme concentration of the S & P 500 – the top six stocks approaching 30% of total market value – was more severe than near the 1999-2000 peak, given these stocks’ somewhat lower earnings contribution to overall index profits today. Related to this critique is the loud and newly pervasive grousing about the potency of the top-heavy S & P 500 itself, purportedly due to passive flows into index funds and the self-reinforcing need of active stock pickers to chase the largest stocks higher to avoid being left behind. This echoes…
2024-02-10 08:21:00
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