Source: Global Market Report
Bill Smead (Bill Smead), founder and chief investment officer of Smead Capital Management (Smead Capital Management), warned that the US stock market could face the biggest risk of collapse in decades as investors become overly optimistic about hyped tech stocks.
In a report on Tuesday, Smith pointed out that the range of winners of the S&P 500 index constituent stocks is extremely narrow. The so-called “Big Seven” stocks contributed most of the S&P 500 index's gains this year, while the other constituent stocks of the index remained relatively stable.
Smith warned: “In short, this appears to be one of the periods where extreme bullishness and participation in the most aggressive and popular securities could cause the stock market to crash. Furthermore, this means that the S&P 500 looks like an overcooked goose because it is full of stocks that cannot provide favorable long-term returns.”
He also stressed that the data shows that compared with the prices of the Nasdaq 100 Index and the Russell 2000 Index, technology stocks seem to have ushered in the best year since this century.
Meanwhile, Bank of America data shows that the price of technology stocks relative to the S&P 500 index has just hit a record high, surpassing the peak of the Internet era.
Smith said, “In our view, the current craze for AI stocks is like an extension of the innovation frenzy that peaked in 2021. Tech stocks are in the late stages of participating in the biggest speculative spree I've seen in the stock market in 43 years.”