Surging U.S. Stocks Echo Dot-Com Rally With Cheaper P/E

Every day, the American bull market looks more and more like the dot-com bubble of the late 1990s. Except when it comes to valuations.

The Standard & Poor’s 500 Index (SPX) jumped above 2,000 today and the Nasdaq Composite Index is within 10 percent of a record reached in March 2000, a time when Pets.com Inc. was worth more than $150 million. Investors have seen annualized returns of 24.5 percent since March 2009, compared with 27.1 percent over an equal amount of days ending March 24, 2000, the peak of the Internet rally, according to data compiled by Bloomberg.

Stocks are catching up to the pace of more than a decade ago amid record profits, near-zero interest rates and economic growth that’s expected to accelerate. While the dot-com bubble peaked with the S&P 500 trading at close to 30 times annual earnings of its companies, the valuation is about 19 times now, data from S&P Dow Jones Indices show.

“We’re on the expensive side of fair value, but certainly not in the bubble place they were in the 2000 period or in a place that concerns us,” Ed Hyland, an Atlanta-based global investment specialist at JPMorgan Chase Private Bank, said in a phone interview. The firm oversees about $1 trillion. “There is potential for the market to go higher.”

Durable Goods

The S&P 500 rallied 0.3 percent to 2,004.16 as of 10:57 a.m. in New York after a report showed the biggest ever jump in durable-goods orders and consumer confidence unexpectedly increased. The Chicago Board Options Exchange Volatility Index, known as the VIX, added 0.9 percent to 11.81.

Five years of gains have driven the S&P 500 up 195 percent, compared with a 236 percent advance over the comparable period ended in March 2000. With the Federal Reserve calling valuations in smaller biotechnology and social-media companies “stretched” and mega-deals resurfacing, concern that prices are too high is growing.

Over the past three years, investors have seen a flood of technology and Internet companies go public, including King Digital Entertainment Plc, Yelp Inc. and Twitter Inc. Alibaba Group Holding Ltd., the Chinese e-commerce company, is working on an initial public offering that may be the biggest in U.S. history.

The dot-com bubble was marked by unprofitable Internet companies selling shares for the first time, such as Pets.com, which had a sock puppet mascot and raised $82.5 million in February 2000. The company has since gone out of business.

http://www.bloomberg.com/news/2014-08-25/record-gain-driving-u-s-stocks-with-speed-of-dot-com-era.html

Related Posts

  • 35
    (Source :  http://jimoshaughnessy.tumblr.com/post/137235375474/short-term-luck-versus-long-term-skill ) Daniel Kahneman, one of the fathers of behavior economics, said one of his favorite papers was “On the Psychology of Prediction (1973).” He claims in the paper that intuitive predictions are often unreliable because people base their predictions on how well an event fits a story.…
    Tags: $, time, investors, stocks, market, data, percent, s&p, trading
  • 34
    Commodity Futures Trading Commission data show the most-bullish six-week change to Aussie positions in more than 1 1/2 years over the period to April 22, just in time to catch a slump that made the local dollar the past week’s worst performer among 10 currencies tracked by Bloomberg Correlation Weighted…
    Tags: time, percent, market, u.s, period, years, trading, data, record
  • 33
    Global investors are lending money to Chinese property developers in record amounts this year, in spite of a deteriorating housing market and warnings from rating agencies over the state of the sector. Offshore bond issuance from mainland property companies is on track for a record year, with $18bn of debt…
    Tags: record, $, market, period, companies, investors, biggest, trading
  • 33
    2014 has been unnerving. Every day, there's a new worrisome headline coming out of Russia, Iraq, Libya, the Gaza Strip, or any of the world's other geopolitical hotspots. And there's also the ongoing fears of an ebola outbreak in West Africa, an unstable volcano in Iceland, and the ever-present risk of a…
    Tags: market, investors, time, stocks, years, u.s, times, percent, march, trading
  • 30
    The Dow had broken 17,000, the Standard & Poor's 500 Index had touched a record high and was spitting distance from crossing 2,000. Even the small-cap indexes such as the Russell 2000 and the S&P 600 have notched new highs. And the Nasdaq, up 255 percent since the March 2009…
    Tags: percent, investors, market, record, stocks, s&p, march, trading