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Investing.com -- JPMorgan said the current market environment differs markedly from the late 1990s tech bubble in five key ways, citing stronger corporate balance sheets, more moderate equity positioning, and less exuberant capital expenditure.
“With comparisons of the current equity backdrop to the dot-com bubble of the late 1990s continuing to feature prominently in our client conversations and in the press, we believe it would be useful to highlight five key differences,” JPMorgan analyst Nikolaos Panigirtzoglou wrote.
First, Panigirtzoglou states that the “non-financial corporate sector overall is in a much stronger financial position than it was in the late 1990s,” noting an average annualized financing surplus of $540 billion in 2023 and 2024.
Second, he believes “overall equity allocations remain some way from the peak of early 2000,” as global non-bank investors are “significantly less overextended.”
Third, JPMorgan highlighted that “the expansion of the bond/cash universe at a pace of $7 trillion per annum currently… is larger than in the late 1990s,” implying equity prices would need to rise 5.7% just to offset that growth.
Fourth, while AI-related spending has surged, JPMorgan feels “capex, including tech-related capex, would need to rise substantially from here to reach similarly exuberant levels” to those seen in the 1990s.
Finally, Panigirtzoglou explained that, unlike the dot-com era, the rise in the PE multiple of the S&P 500 "reflects to a significant extent the rising share of the Mag7 due to higher delivered earnings growth rather than pure multiple expansion.”