There was a lot for investors to worry about last week, and there still is. But the stock market has a habit of climbing a wall of worry. It seems to be doing so now, with technology leading the way, notes Ed Yardeni, editor of Yardeni QuickTakes.
Investors have been watching analysts raising their earnings expectations faster than stock prices have been rising. As a result, stocks have gotten cheaper, assuming that analysts' exuberant earnings expectations are rational. Investors may be coming around, gaining more confidence in FEMO (i.e., fabulous earnings momentum).
(Editor’s Note: Ed will be speaking at the 2026 MoneyShow Masters Symposium Sarasota, scheduled for Nov. 30 – Dec. 2. Click HERE to register.)
In particular, investors may be rethinking the valuation of the S&P 500 Index (^SPX) information technology and communication services sectors, especially the Magnificent Seven and the S&P 500 semiconductor industry. They've all gotten cheaper on a forward P/E basis, as analysts' earnings expectations have outpaced their stock prices.
IT and communications services together now account for a near-record 48.1% of the S&P 500's market capitalization. And they account for nearly as great a share of the S&P 500’s forward earnings at a record 46.5%!
Yet fears of another 1999 Tech Bubble followed by a Tech Wreck have been blown away by the drop in the two sectors' combined forward P/E – from 29 late last year to 19.5 currently. In other words, the sectors are relatively cheap, especially given their rapid earnings growth.
