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Is There a Bubble in the 'Magnificent Seven' Stocks?

  • 📰 FT
  • ⏱ Reading Time:
  • 26 sec. here
  • 7 min. at publisher
  • 📊 Quality Score:
  • News: 31%
  • Publisher: 51%

Finance أخبار

Stock Market,Bubble,Technology Stocks

The article discusses the possibility of a stock market bubble, focusing on the recent dominance of the 'Magnificent Seven' technology companies in the S&P 500. The author argues that identifying a bubble requires both a look at valuation parameters and a psychological diagnosis of 'irrational exuberance.' He explains how the allure of 'newness' and the belief that 'this time is different' often drive investors to overpay for assets, leading to bubbles.

The writer is co-founder and co-chair of Oaktree Capital Management and author of “Mastering the Market Cycle: Getting the Odds on Your Side” Many investors these days are on heightened alert for asset price bubbles, concerned about a repeat of past booms and busts.

It certainly looked that way, and that assumption prompted tremendous demand for everything internet-related. Ecommerce stocks went public at seemingly high prices and then tripled on the first day. There’s usually a grain of truth underlying every mania and bubble. It just gets taken too far. The internet absolutely did change the world, but the vast majority of dotcom companies that soared in the late 1990s bubble ended up worthless. Too much optimism on the new thing leads to pricing errors.

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