(Bloomberg) — The S&P 500’s rise to record highs bears no resemblance to past bubbles, fueled by a handful of ultra-powerful technology stocks, according to Goldman Sachs Group Inc. strategists.
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Stocks with an enterprise value-to-sales ratio of more than 10 account for 24% of U.S. stock market capitalization, compared to 28% in 2021 and 35% during the tech bubble, strategist David Kostin said in a March 1 report. I’m writing it in a memo. He added that the range of “extreme valuations” is much more subdued, as the number of stocks trading at that multiple is down significantly from its 2021 peak.
“This time it’s different,” Kostin said. “Unlike the widespread ‘growth at all costs’ of 2021, investors are primarily paying high valuations for the largest growth stocks in the index. We believe it is supported by the fundamentals.”
The so-called Magnificent Seven, made up of Apple Inc., Microsoft Corp., Nvidia Inc., Amazon.com Inc., Meta Platforms Inc., Alphabet Inc., and Tesla Inc., drives the S&P 500 index to an all-time high. It has become the driving force that pushes us forward. It was a year fueled in part by the frenzy surrounding artificial intelligence. The rally has led strategists to scramble to raise the benchmark index’s 2024 end-of-year target just two months into the year.
Bank of America strategist Savita Subramanian became the latest person to raise her forecast for the S&P 500 index from 5,000 points to 5,400 points, suggesting a rise of about 5% from Friday’s close. Her target is currently among the highest on Wall Street and is based on bullish signals about stronger earnings growth and “remarkable” margin resilience.
Other strategists, such as John Stoltzfus of Oppenheimer Asset Management, also dismiss the risks of forced positioning and technical indicators. Stoltzfus said in a note that this bullish momentum is driven by fundamentals that are “too strong to argue with” and is reflected in data showing resilience in business, consumer spending and employment growth. Ta.
“There is room for stock market gains to expand further this year, and there appears to be an opportunity for the stock market to further overcome the proverbial wall of fear,” the strategist said.
–With assistance from Jessica Manton.
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