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The stock market increasingly risks failure as tech stocks soar in the 'biggest speculative orgy' in over 4 decades, market vet says

Dec 05, 2023 - markets.businessinsider.com
Market veteran Bill Smead has warned that the stock market could be on the brink of a major downturn due to extreme investor sentiment and an over-reliance on tech stocks. He suggests that the S&P 500 appears overvalued due to an overload of stocks that do not offer favorable long-term returns. Smead also highlighted that tech stocks could be in their biggest speculative bubble in over 40 years, with the so-called Magnificent Seven, a group of mega-cap tech firms, accounting for most of the S&P 500's gains this year.

Smead also warned of a potential bubble forming in AI stocks, which could soon start to unravel. Other Wall Street commentators have echoed this sentiment. Meanwhile, bets on a stock market crash have increased among experienced investors, with 61% of institutional investors in September believing US stocks have a more than 10% chance of crashing, according to the Yale's School of Management US Crash Confidence Index.

Key takeaways:

  • Market veteran Bill Smead warns that the stock market is at risk of a major retreat due to extreme investor sentiment, particularly towards tech stocks.
  • The S&P 500 is described as an 'over-cooked goose', overloaded with stocks that don't offer favorable long-term returns.
  • Tech stocks could be in their biggest speculative bubble in over 40 years, with a particular focus on AI stocks.
  • There has been an increase in bets on a stock market crash among experienced investors, with 61% of institutional investors in September believing there is a more than 10% chance of a crash.
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