Nervous investors see the dominance of technology stocks and point to the year 2000 as a potential analogue for imminent market disaster. BofA Securities global head of equity derivatives Benjamin Bowler admits there are some similarities between now and then but that market conditions are closer to 1995, when big gains were ahead for the next half decade.
Return dispersion – the extent that stock performance for each index constituent is similar to the benchmark – can also signal the imminent implosion of an asset bubble. In this case the signs are worrying. The narrowness of current market leadership, with only a few AI-related tech giants determining S&P 500 performance, has only been higher in 2007 and 1998. This was just before the U.S. real estate and 1990s tech bubbles burst respectively.
Mr. Bowler is right to point out that the Nasdaq gained more than 80 per cent in both 1998 and 1999 so investors that sell AI-stocks now are risking a severe case of regret. Again, market tops can’t be called. No. I think it’s your imagination. A share of Royal Bank of Canada – or any other Canadian company – traded on a Canadian exchange is identical to a share of Royal Bank traded on a U.S. exchange. The only difference is that one is quoted in Canadian dollars and the other in U.S. dollars, so their market prices should reflect the Canada-U.S. exchange rate and nothing more.