According to the Smart Finance app, some people on Wall Street believe that the strong rebound of the US stock market in 2024 indicates a potential bubble similar to that of the internet era. However, the investment managers of the GMO company under Jeremy Grantham, the legendary value investor known as the 'bubble prophet', believe that it is not reasonable to compare today's 'seven giants' with the prosperity and recession cycle of the late 1990s, because there are not so many worrying factors in the fundamentals and multiples of these giant tech companies.

In 2000, the median price-to-earnings ratio of the top 10 US market cap companies was 60 times, because investors were 'deceived' by the communication revolution of that time and the 22% annual return of these companies in the past five years.

GMO calculates the company's basic return based on dividend income and earnings per share growth. The team estimates the expected basic return by dividend yield and consensus earnings growth.

In the optimistic scenario, if the top 10 companies from 2000 can achieve a median basic return of 19% per year, and the stock price remains unchanged in the next five years, by 2005, their median price-to-earnings ratio may exceed 25 times.

However, the actual situation is 'completely different', with a median basic return of 'relatively negligible' 8% per year for this group of companies. Investment managers said, 'The total return is very poor, perhaps not surprisingly. The best-performing company in this group-the only company with positive returns-is ExxonMobil (XOM.US).'

Today, the top 10 US market cap companies achieved an impressive basic return of 19% per year since 2019, but compared with 24 years ago, the situation is completely different. The median price-to-earnings ratio today is only 27 times, whereas in 2000 it was 60 times.

GMO's investment managers said that if today's top 10 companies can achieve an expected basic return of 19% per year and their prices remain unchanged in the next five years, their price-to-earnings ratio will drop to 12 times by 2029. 'Investors have lower expectations for today's giant companies than they did in 2000. In a sense, the risk today is lower.'

GMO's investment managers said, 'Even from a technical point of view, the market seems similar on the surface, but no one can predict in the short term. However, in the long run, whether today's giant companies will become great investments or not-so-great investments will depend on their fundamental evolution and the impact on valuation multiples.'

On Thursday, the US stock market closed lower, as new data raised concerns about an economic slowdown. The number of Americans who applied for unemployment benefits last week jumped to 249,000, near a one-year high, and a key factory indicator in July fell for the fourth consecutive month, reaching an eight-month low.