The stock market is reliving the dot-com tech bubble as the Magnificent 7 accounts for 45% of the S&P 500’s gains.

Google, Apple, Facebook, Amazon and Microsoft logos displayed in front of an EU flag.JUSTIN TALLIS/AFP via Getty Images

  • BofA’s Michael Hartnett says markets are behaving as they have during previous bubbles.

  • The Magnificent Seven accounted for 45% of the S&P 500’s return in January.

  • With a market capitalization of $12.5 trillion, the group has surpassed the GDP of major cities such as New York and Tokyo.

The Magnificent Seven’s continued outperformance underlines bubble-era market behavior similar to what we saw during the tech rally of the late 1990s, Bank of America said in a note Friday.

While falling interest rates lifted Nasdaq prices in the fourth quarter, the dynamics have changed in the first month of the year, with both interest rates and stock prices jumping in the first four weeks of 2024.

That kind of market behavior is observed in periods after a recession or in times of market bubbles, similar to the dot-com era, Bank of America analysts led by Michael Hartnett note.

The Magnificent Seven accounted for 45% of the S&P 500’s return in January, continuing a wild streak of outperformance that continued throughout 2023. Excluding Tesla, which has seen a sharp decline in its share price this year, the group is actually responsible for 71% of share prices. the gains in the reference index.

With a market capitalization of $12.5 trillion, the group has surpassed the GDP of major global cities such as New York, Tokyo, Los Angeles, London, Paris, Seoul, Chicago, San Francisco and Shanghai, BofA says.

While it’s still possible the Fed will cut rates in March, Hartnett said markets don’t seem too concerned about Jerome Powell’s next move.

He emphasized that the Fed serves as a support for asset prices…

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