Top economist says stock market looks a lot like it did before dot-com bubble and ’08 crash

Traders work on the trading floor of the New York Stock Exchange on October 13, 2008. Reuters/Shannon Stapleton

  • The stock market looks similar to the period before the dot-com bubble and the 2008 market event.

  • David Rosenberg points out that the boom in artificial intelligence has triggered a “raging bull market.”

  • He warned that the “speculative mania” in the stock market may soon be over.

Economist David Rosenberg said the stock market is flashing the same warning signs of “speculative mania” that preceded the 2008 and 2000 stock market crashes.

The Rosenberg Research president — who called 2008 a recession and has been outspoken in his bearishness on Wall Street during the recent market rally — noted that a “violent bull run” is underway in stocks, with the S&P 500 topping 5,000 for the first time Click to mark last week’s time.

The benchmark index has soared about 22% from its October lows, breaching the official threshold for a bullish market. The index has also risen over the past five weeks and has risen in 14 of the past 15 weeks – a streak of gains not seen since the early 1970s.

But Rosenberg wrote in a note on Monday that the significant gains are a double-edged sword for investors, as the market looks very similar to the environment before the dot-com bubble and 2008 crash.

“Day after day, it feels like a cross between 1999 and 2007. It’s a huge speculative price bubble in most risk assets, and while artificial intelligence is real, so is the Internet, which is rapidly evolving. The same goes for stocks. He was referring to the 50 large-cap stocks that dominated the stock market in the 1960s and 1970s and have since fallen about 60%

Other Wall Street strategists also warned Similarities Between Today’s Market and Similar Stock Booms in the PastArtificial intelligence hype drove seven stocks that dominated the S&P 500’s gains last year. Major price adjustments The company is on the rise as valuations soar to unsustainable levels, Richard Bernstein Advisors said in an October 2023 report.

“That’s the problem when a group of giant ‘concept’ stocks trade at twice the price of the rest of the market. The lesson is (i) the higher they go, the harder they fall, and (ii) there’s Rosenberg “The reality of economic growth doesn’t mean we’re not entering a state of over-exuberance in financial markets,” he said, referring to the hype surrounding artificial intelligence.

The stock market outlook is also affected by uncertain economic conditions. Rosenberg added that geopolitical risks, recession risks and the risk that the Fed would disappoint investors hoping for a rate cut have not yet been priced in by the market.

“I don’t think speculative manias are going to trigger my personal finances, and I avoid them like the plague,” he said. “Not everyone likes to hear that, especially since I missed the big part of this rally. Part of the time, but that’s the way I do it.”

Rosenberg has previously warned investors to exercise caution as he sees the market facing a range of risks going forward. Previously, he said the S&P 500 looked “very similar“By 2022, the index plummeted 20%. Part of the reason A recession “few see and few are prepared to deal with” “The economy is here for the sake of the economy,” he wrote in a LinkedIn post last month.

Read the original article business insider

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