Not the time to fall asleep at the wheel
Jul 12, 2024
Despite slow economic growth and higher interest rates, equity market valuations overall look elevated compared to their historical norms, especially in some corners of the market like the US Mega-tech stocks. Elevated asset prices could signal over-optimism, increasing vulnerability to market corrections if earnings growth disappoints or economic conditions worsen. This has raised concerns among investors and analysts about potential market exhaustion and the risk of a significant correction.
While many companies have solid fundamentals, the extended valuations question the sustainability of the current market rally. The recent drop in NVIDIA’s share price, despite its later recovery, is seen as a potential sign of market exhaustion.
In this environment, it is crucial to exercise caution, focus on fundamentals, diversify portfolios, understand the drivers behind current valuations, and avoid chasing speculative bubbles. It is important to remember that FOMO ( Fear of Missing Out ) periods can last longer than expected but can also change shape or end abruptly when it is least expected.
