S&P Would Need to Rise 20% to Look Like '90s Bubble: SocGen

Firms including Bank of America Corp. and Goldman Sachs Group Inc. are among those that have aimed to dispel parallels to the dot-com era, while JPMorgan Chase & Co. has sounded the alarm about the market’s potential froth.

“Turning point signals say run with the bulls,” Kabra wrote in his note. “The S&P 500 has clear room to overshoot,” he added, “as the new highs on the index coincide with new highs in the profit cycle.”

During the internet boom at the turn of the century, the technology sector traded at two times its profit share in the S&P 500 and 25 times its forward price-to-earnings ratio, well below today’s metrics.

Applying the same math would place the gauge at 6,250 to “tip over into irrational exuberance from current rational optimism,” according to Kabra.

The strategist said the Nasdaq 100 Index is the source of the earnings cycle.

He advised clients to stay long U.S. technology stocks on expectations for profits to further accelerate in the first half of this year and to stay long on industrial stocks on reshoring and redistribution of global supply chains.

(Adobe Stock)