Stocks Show Concerning Signs of Overextension, Echoing Tech Bubble
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On Friday, the number of market losers was more than twice the number of winners in the S&P 500 - something that last happened the day after Black Monday in 1987, according to economist David Rosenberg.
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The low number of stocks participating in the market rally signals a lack of breadth that is concerning, Rosenberg said.
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Most of the gains are accruing to a small group of tech stocks, giving investors dot-com bubble déjà vu.
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While the S&P 500 P/E is 20x, stocks are so overvalued they are delivering lower returns than 3-month T-bills - an abnormal situation that signals overextension.
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Unlike the 90s, stocks are significantly more overvalued this time going into the Fed's next easing cycle, with the Nasdaq P/E at 20x versus 15x back then.