Investors risk 1999-like bubble and 2000s-era crash
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While the market is partying like it's 1999, investors would be smart to remember what came next: the 2000 dotcom bubble, when stock prices rose substantially above underlying asset values, resulting in a market crash.
Why it matters: Wall Street analysts are increasingly noting signals of a bubble, as stocks are priced to perfection while uncertainty remains on the political and economic fronts.
By the numbers: The Nasdaq 100 has gone 60 trading days without closing below its 20-day moving average, according to financial services firm BTIG.
- That's the second-longest streak in history. The longest streak ended in early 1999 and, as noted above, a crash followed.
- It's worth noting the S&P 500 is currently trading at 26 times forward earnings, which is above the historic average of 18.
Between the lines: Investor activity on volatile stocks is a "red flag for the broader market," according to a research note from J.P. Morgan.
- Investors are buying highly volatile stocks — with the greatest upside and the largest downside risk — at the fastest rate in 30 years. This is driven by markets "pricing in a goldilocks outcome," per the note.
- J.P. Morgan analysts are saying investors should sell into this unbridled enthusiasm for high-beta stocks specifically.
The intrigue: Sky-high valuations put stocks at risk, especially if there's an economic slowdown.
- The second half of 2025 is looking "pretty soft", Bob Elliott, chief investment officer at Unlimited Funds, wrote on Substack.
- "The slew of hard data released over the last couple weeks confirms a broad based slowing of the US economy," he wrote.
Yes, but: As the big banks recently made clear in their quarterly earnings, there are not signs of much slowing when you look at how consumers are spending.
- Bank of America analysts do not predict a recession this year, thanks to continued resiliency among consumers.
Be smart: In 1999, tech stock darling Cisco was priced at 200 times earnings. Today, a similar market darling, Nvidia, is priced at under 40 times earnings.
- The market may not be at the bubble yet, but the risks are mounting.
The bottom line: Strategists from J.P. Morgan and RBC to HSBC told Axios that clients are increasingly focused on 2026 and hoping the uncertainty in 2025 works itself out.
- That becomes a problem if the market starts to flash sell signals this year, which is starting to happen, according to a note from HSBC.
