With signs of excessive speculation and high valuations in the stock market, the current environment resembles a late-cycle bubble that is “similar” to the dotcom boom in 2000, Bank of America says, a negative year for stocks in 2022. to predict.
“There are too many parallels between today and 1999/2000 that should be overlooked,” analysts led by Savita Subramaniam, head of US equity and quantitative strategy at Bank of America, said in a recent note.
Analysts said the current market set-up is similar to just before the Internet tech bubble burst in the late 1990s, when the stock plunged into a bear market beginning in 2001.
Some signs in today’s market are arguably worse than in 2001, with Bank of America arguing that the signs of speculation are clear amid “increasing acceptance of the unimaginable” among investors.
With increasingly worrying signs in today’s markets including negative real interest rates, rising inflation, frenzied IPO activity and liquidity risks, the Wall Street firm now predicts a negative year for stocks ahead.
Bank of America has set a price target of 4,600 for the S&P 500 next year, down 2% from Monday’s closing price of 4,682.84.
Analysts at other major banks are mixed on how the S&P 500 will fare next year: Morgan Stanley has a price target for the index that is even lower than Bank of America, while JPMorgan, Goldman Sachs and Wells Fargo Like expect all other stocks. Slightly increased in 2022.