Investors Can’t Stop Dancing to the Market’s Tune
Prices are high and pros are anxious, but it’s hard to fight the Fed and an optimistic mood.
If the year 2020 wasn’t weird enough already, add this to the list: The U.S. is in the middle of a recession, yet some professional investors are worried that the stock market may be rallying itself right into a bubble.
While most Americans are still trying to avoid crowds to stem the spread of the coronavirus, investors are crowding tightly into shares of tech-inflected companies believed to have the least at risk from the economic disaster. To buy into the U.S. stock market right now means paying about $23 for every dollar of earnings from companies in the S&P 500, the most in a decade. The Nasdaq 100 Index’s valuation, at 34 times earnings, is the highest it’s been in more than 15 years. These numbers are unusually skewed to the biggest names, which investors have piled into. The five biggest American stocks—Apple, Microsoft, Amazon, Alphabet, and Facebook—now account for almost a quarter of the total market value of the S&P 500, compared with around 12% in 2015.