The Nasdaq has rallied 17% since August, though some days feel like everything is down. Stocks have come a long way, prompting concern over valuation, especially among AI high-flyers. I get it, but we are nowhere near a bubble. We are in a strong uptrend, and I’m a buyer of high-growth leaders on pullbacks, advises Adam Johnson, editor of Bullseye Brief.
New highs inspire confidence and pullbacks present opportunity for thoughtful long-term investors and traders. Earnings growth, economic resilience, and business-friendly government justify new capital deployment. Bullseye is fully invested and sees far more to like than to fear into year end and beyond
It’s curious that markets rise to new highs almost daily, punctuated by nasty downdrafts that happen almost as often. It’s curious that earnings and profits are rising to record highs, despite tariffs that were expected to derail the economy. It’s curious that government shut down, but no one on Wall Street or Main Street seemed to care.
Curious indeed...except that some stories matter to the market while others do not. Looking to year end and beyond, I see far more to like than to fear. True, volatility will persist, but the trend will be higher.
The stock market is not in a bubble, not even close. Currently, the S&P 500 Index (^SPX) trades at 23 times forward earnings. Historically, bull markets have averaged 17-24 times. So, while the broad market may be towards the upper end of its expected range, valuation is far from extreme.
By contrast, previous market tops in 2000 and 2009 witnessed valuations of 45x and 70x, respectively. The Nasdaq even rallied to 200x during the Dot-Com binge, nearly seven times higher than its current 35x multiple. So no, markets are not in a bubble. Dips are to be bought.
