Just twenty-four days into 2024, and the S&P 500 has already blown past the Wall Street consensus over where the index will finish the year.

Helped by advances in Nvidia Corp. and Microsoft Corp, the world’s most watched equity benchmark is again on the up in Wednesday trading. Rising for five sessions, the S&P 500 just surpassed 4,867, the average level where forecasters in a Bloomberg survey pegged it 11 months from now.

Count venerated stocks-watcher Ed Yardeni among those getting nervous about the speed of the move, which builds on last year’s 24% rally thanks mostly to the expansion in valuations. Not that the 40-year veteran didn’t see it coming — his year-end forecast is 5,400 versus today’s 4,888.

Yet the speed of the advance is worrying bulls like Yardeni, even as valuations and retail-investing activity suggest this equity advance has stronger foundations than previous bouts of euphoria.

“Our main concern right now is that the S&P 500 may be starting a tech-led meltup similar to what happened during the second half of the 1990s,” the founder of Yardeni Research Inc. wrote in a note. “We are wondering whether a bout of irrational exuberance might push the multiple higher, inflating a speculative bubble in the stock market as occurred during the late 1990s.”

It’s the latest case of bullish market momentum that’s catching investing pros off-guard – after being blindsided last year by the sudden revival in risk appetite across assets.

Up 0.5% as of 1:55 p.m. in New York, the S&P 500 is poised for its fourth straight all-time high after a two-year round trip where stocks entered and exited a bear market. The Nasdaq 100 and the Dow Jones Industrial Average also advanced over the stretch, breaking record. 

Even as bubble warnings percolate, stocks look notably less extended as they did as recently as three years ago, when single-session meme-stock eruptions were a daily occurrence and the Nasdaq 100’s price-earnings ratio was roughly 4 points higher than now. And unlike in the dot-com era, today’s technology firms are generating profit growth that, while not quite keeping pace with price action, is on a similar trajectory.

Consider the seven largest tech firms that also include Apple, Alphabet, Amazon.com, Meta Platforms and Tesla. Trading at 49 times profits, the cohort looks very expensive next to a P/E ratio of 17 for the average stock in the S&P 500.

But the valuations remain relatively tame viewed against the bubble era of the late 1990s. If they were to reach only half of the peak multiples of the seven largest tech stocks of that time, today’s so-called Magnificent Seven would have to rise by 55% each, according to a recent analysis by Bank of America Corp. strategists including Benjamin Bowler. That’d translate to a 15% gain for the S&P 500, all else equal.

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