The parallels between the artificial intelligence boom and the DotCom bubble of the late 1990s are becoming increasingly prominent, sparking both excitement and apprehension. Last Monday, Macquarie strategist Matthew Brooks advised clients to embrace a bullish outlook, citing resilient global economic growth and significant interest rate cuts reminiscent of 1998. The Nasdaq 100 index has since surged, marking a 35 per cent gain since early April. However, BTIG strategist Jonathan Krinsky points out the Nasdaq’s 61-day streak above its 20-day moving average, a pattern last observed in February 1999.
Despite the similarities, significant differences exist. Today’s tech giants generally demonstrate substantial profitability, unlike many of the DotCom era’s high-flying but unprofitable stocks. Furthermore, Krinsky notes that previous market gains, particularly on the Nasdaq and S&P 500, were considerably larger during the original DotCom boom. VanEck’s Social Sentiment ETF, tracking stocks favoured by retail investors on social media, has jumped 63 per cent since mid-April, adding another layer to the comparisons.
Lisa Shalett, Chief Investment Officer at Morgan Stanley Wealth Management, cautions against complacency, highlighting the potential impact of tariffs. She suggests that the Federal Reserve is right to wait and see how tariffs play out. She notes that their full effect is yet to be felt, obscured by factors like inventory building. Morgan Stanley equity strategist Mike Wilson anticipates a possible market correction, potentially driven by tariff impacts and rising US Treasury yields.
Wilson views any near-term sell-off as a buying opportunity, maintaining his S&P 500 target of 7200 points by mid-2025, indicating a substantial upside from current levels. Despite near-term risks, his stance remains optimistic. For context, Morgan Stanley is a global financial services firm that provides investment banking, wealth management, and investment management services. They offer strategic advice, raise capital for clients, and manage assets for institutions and individuals.
