It’s high time for me to stop pontificating on all the reasons why the U.S. stock market is crazily overvalued and all the reasons to be bearish based on all the variables I have relied on in the past — from valuation, to sentiment, to overcrowded positioning. So, what I am going to start doing is assessing what it is the market is saying, because the market can certainly move to excesses in both directions and make faulty assumptions, but the market is not stupid.
Now, it needs to be said that no, this is not the case where I wasn’t on top of what was happening in this technology wave over the past year. We published reports on the outlook for AI and also held a special AI webcast at the beginning of 2024. What I clearly underestimated was the dramatic impact this was going to exert on market psychology and the powerful upward shift in investors’ long-term earnings expectations that were the primary drivers of valuations this past year.
A few last items to cover before wrapping up. As I said, this piece is about a revelation, an epiphany, and an explanation as to why this market in Bob Farrell style has definitely gone much further than anyone thought. It’s not just me — the consensus S&P 500 target for the end of 2024 published in December of last year was near 4,900 and change, and the index is already north of 6,000.