History suggests a stop in the current development. When it achieved a new high on Jan. 19, the S&P 500 erased bear market losses and has gained 7% since.
Stocks have rallied after breaking new highs before. However, CFRA's senior investment strategist Sam Stovall said those advances were followed by at least 5% falls in 12 cases.
The market's optimism and parabolic moves in Nvidia and other AI-focused company shares have drawn comparisons to the meme stock rallies of 2021 and the dot-com surge of 1999.
After tripling in 2023, Nvidia's shares are up over 80% this year, putting it the third most valuable U.S. corporation. The S&P 500 is scheduled to include AI-linked stocks like Super Micro Computer (SMCI.O), which has risen 300% this year.
"We caution investors that this relationship is likely to work in reverse when the AI euphoria peaks," they wrote. Others observe contrasts from earlier bubbles. Truist co-chief investment officer Keith Lerner claimed that the S&P 500 technology sector outperformed the broader S&P 500 by 30% over three years.
Lerner said it is close to the 30-year norm and far from March 2000's peak of 250%. The fresh issue market, where IPOs have been slow, shows little excitement.
Nicholas Colas, co-founder of DataTrek Research, claimed 54 firms had IPOs in 2023, down from 311 in 2021 before the S&P 500 peaked in January 2022.
"Sentiment has warmed up on equities since mid-2023... but is nowhere near bullish levels of prior market peaks," stated BofA Global Research equity and quant strategist Savita Subramanian. The bank boosted its S&P 500 year-end estimate to 5,400 from 5,100. The index closed Tuesday at 5,175.27.
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