Barclays: Tech stocks are at levels not seen since the dot-com days - Business Insider

REUTERS/Andrew KellyThe collective valuation of the S&P 500 is at its highest level since the dot-com boom, according to new research from Barclays.

That looks like a bubble, and it could burst when a coronavirus vaccine is released and helps jumpstart the broader economy, said Barclays' Maneesh Deshpande.Collectively, the stocks that make up the S&P 500 are trading at a value not seen since the peak of the dot-com bubble, and you can peg that rise to a similar cause — tech stocks.

Still, in a research note on Thursday, Deshpande downgraded the biggest tech stocks — Facebook, Amazon, Netflix, Microsoft, Apple, and Google parent Alphabet, collectively dubbed by Deshpande as FANMAG — to a market weight rating from overweight on the potential that they could be sold off in coming months.Deshpande made the comparison to the dot-com era in his research note. The S&P stocks are trading at 18.

This time around, those select few tech and ecommerce companies — Deshpande dubbed them the "resilient" stocks — are trading at 29.2 times their expected year-out earnings. That valuation exceeds the overall S&P 500's peak ratio in the dot-com boom. It's also 50% above the median valuation ratio those stocks have posted over the last 5 years and 25% above their previous high.

Seeing that, investors — particularly everyday ones — have been buying up shares in these resilient companies.A vaccine could poke the bubble When that starts to happen, investors will likely rotate out of some of the big tech stocks and into some of the cyclical stocks that are likely to see their revenue and earnings start to surge, Deshpande said. Given their relative valuations, those cyclical stocks are likely to look cheap compared with the resilient ones — despite what will likely be similar growth expectations.

I'm wondering if political sentiments are effecting this too? Tech has largely become successful thru Democrat controlled k-12 education & academia. The reality is, it still hasn't met the needs of healthcare, banking, government, and a lot of industry.

Brrrr

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