Key insights
- Michael Burry warns of market similarities to the dot-com bubble. Art Hogan counters that current valuations are far lower (Nasdaq PE of 27x vs. 200x in 2000) and earnings growth is strong. While some parabolic moves in tech stocks are reminiscent of the late 90s, the fundamental backdrop is different, suggesting a less severe risk of a crash. This divergence of opinion creates uncertainty, leaning slightly bearish.
The "Big Short" investor Michael Burry raised concerns about the current state of the market (^DJI, ^IXIC, ^GSPC), writing that it has "jumped the shark" in a Substack post on Monday. Burry is best known for predicting the 2007 mortgage crisis.
Yahoo Finance Executive Editor Brian Sozzi speaks with Senior Reporter Ines Ferré and B. Riley Wealth chief market strategist Art Hogan about the factors that may set this current market apart from the dot-com bubble era.
But I want to stay on uh people of interest, Art, because you heard me mention Michael Burry at the top. When you hear someone like this come out and warn of a stock market crash, what's your first thought?
Well, a couple of things. First and foremost, I think you you set it up perfectly. You have no idea what he's actually doing, but what he's saying is he's concerned that uh today feels a lot like 1999 and 2000.
And the three things I'll say on that, while it does in terms of the uh parabolic moves we've seen in the top Nasdaq stocks, um the Nasdaq 100 stocks, there's a comparison there. But if you take a step back and say, well, what do the PE's look like now as compared to 2000 uh 99 and 2000,
you'd see the Nasdaq uh composite index and the Nasdaq 100 were north of 200 times where they're trading now at 27 times. So while, yes, the price appreciation has seemed rapid, you also important to remember the Nasdaq composite is up, call it 100% over the course of the last three years.
In that same time frame, the Nasdaq composite was up 300%. So, while there may be it may feel the same, it's been driven by earnings to your point on the on the opening.
The uh earnings growth in the SP 500 north of 25% this quarter with projections for double digit growth for the balance of this year. I think the fundamental backdrop is completely different.
And as in Burry's not alone here. Over the past week, we've seen a lot of strategists on the street try to reflect back to the dotcom bubble and compare it to today. Well, news flash, unlike the dotcom bubble, a lot of these tech companies are making boatloads of money.
And not only are they profitable entities, these stocks that are driving the markets, I see you Mag 7, they are cash generating beasts. A totally just a different environment in many cases compared to that dotcom bust.
And that's one of the points that strategists have been pointing to. And as you mentioned, Evercore ISI saying that this feels like 1999, but to Art's point as well, the valuations are not the same as back in the Y2K era.
Um, so there are there is a distinction. Um, there are more sort of fundamentals that some strategists are pointing to, but this does feel bubblish, so to speak, when you see the earnings revisions going higher and higher.
You've got Yardeni research that up their price target for the S&P 500, basically calling it an earnings led meltup in uh stocks. So, this does feel like that euphoria of 1999, but it it different fundamentals, so to speak.
And what phase of the bubble are we in? I mean, that is what really nobody knows just yet.