Tech stocks haven’t been this hot since the dot-com bubble

Investors haven’t loved tech stocks this much since the height of the dot-com bubble.

The sector is on pace to absorb the most capital in 15 years, an inflow that will represent roughly 25% of assets under management for the group, according to Bank of America Merrill Lynch data. For context, the same measure hasn’t exceeded 17% on an annual basis since the dot-com era.

Screen Shot 2017 05 19 at 9.09.31 AM

While that may sound like an encouraging sign for stock investors seeking fuel to keep the eight-year-old bull market chugging along, BAML has a warning: If the rest of the market doesn’t catch up, there could be problems.

“The longer it takes the economy and yields to pick up, the greater the risk of tech mania,” BAML chief investment strategist Michael Hartnett wrote in a client note.

Hartnett notes that the Nasdaq Internet Index, a 90-company gauge featuring the likes of Google, Amazon and Facebook, is on pace for a 75% gain in 2017.

Tech stocks are being underpinned by the best profit expansion in the S&P 500, excluding energy. The sector is projected to see earnings expansion of 19% for the full year 2017, while the broader benchmark is expected to see ex-energy growth of just 9.2%, according to data compiled by Bloomberg. Tech has been one of the leaders of the S&P 500’s profit growth resurgence, which has the index primed for its best quarter since 2011

The S&P 500 is currently trading at about 21 times earnings, far lower than the P/E of 31 times seen at the peak of the dot-com era.

SEE ALSO: Elon Musk just admitted that Tesla’s stock is out of control

Join the conversation about this story »

NOW WATCH: Colonel Sanders’ nephew revealed the family’s secret recipe — here’s how to make KFC’s ‘original’ fried chicken

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s