If the year 2020 wasn’t weird enough already, add this to the list: The U.S. is in the middle of a recession, yet some professional investors are worried that the stock market may be rallying itself right into a bubble.
While most Americans are still trying to avoid crowds to stem the spread of the coronavirus, investors are crowding tightly into shares of tech inflected companies believed to have the least at risk from the economic disaster. To buy into the U.S. stock market right now means paying about $23 for every dollar of earnings from companies in the S&P 500, the most in a decade. The Nasdaq 100 Index’s valuation, at 34 times earnings, is the highest it’s been in more than 15 years. These numbers are unusually skewed to the biggest names, which investors have piled into. The five largest U.S. stocks—Apple, Microsoft, Amazon, Google parent Alphabet, and Facebook—now account for almost a quarter of the total market value of the S&P 500, compared with about 12% in 2015.
The cheapest price-earnings ratio among the Big Five is about 30. At 37, Microsoft Corp.’s is the highest since the euphoric dot-com heyday 20 years ago. That said, a few other names have also taken part in the boom. Tesla Inc., not yet in the S&P 500, is trading at 10,000 times earnings.
These valuations are all based on the earnings that have already been reported. Investors are willing to pay this much because they assume future earnings will be better. But when it comes to the market as a whole, future earnings are anybody’s guess, because a record number of companies have decided the outlook is too uncertain for them to provide investors with profit forecasts.
Denne historien er fra July 27, 2020-utgaven av Bloomberg Businessweek.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent ? Logg på
Denne historien er fra July 27, 2020-utgaven av Bloomberg Businessweek.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent? Logg på
Instagram's Founders Say It's Time for a New Social App
The rise of AI and the fall of Twitter could create opportunities for upstarts
Running in Circles
A subscription running shoe program aims to fight footwear waste
What I Learned Working at a Hawaiien Mega-Resort
Nine wild secrets from the staff at Turtle Bay, who have to manage everyone from haughty honeymooners to go-go-dancing golfers.
How Noma Will Blossom In Kyoto
The best restaurant in the world just began its second pop-up in Japan. Here's what's cooking
The Last-Mover Problem
A startup called Sennder is trying to bring an extremely tech-resistant industry into the age of apps
Tick Tock, TikTok
The US thinks the Chinese-owned social media app is a major national security risk. TikTok is running out of ways to avoid a ban
Cleaner Clothing Dye, Made From Bacteria
A UK company produces colors with less water than conventional methods and no toxic chemicals
Pumping Heat in Hamburg
The German port city plans to store hot water underground and bring it up to heat homes in the winter
Sustainability: Calamari's Climate Edge
Squid's ability to flourish in warmer waters makes it fitting for a diet for the changing environment
New Money, New Problems
In Naples, an influx of wealthy is displacing out-of-towners lower-income workers