S&P Would Need to Rise 20% to Look Like 90s Bubble, SocGen Says

If a bubble is forming in US stocks, it has plenty of room to expand before it bursts, according to strategists at Societe Generale SA.

A team at the bank led by Manish Kabra said the S&P 500 Index can climb to 6,250 — roughly 20% from its current level — before reaching the multiples seen at the peak of the dot-com boom in 2000. That suggests the stock market can continue its sharp advance despite brewing worries that it has run up too far.

“We think the current rally has been driven more by rational optimism than irrational exuberance,” Kabra, SocGen’s head of US equity strategy, said in a note to clients. He cited the “better-than-perceived” earnings breadth, new profit-cycle highs, and an upturn in global economic indicators. “We expect these drivers to maintain their momentum.”

Not Near Peak

His optimism comes after US equities posted gains in all but three weeks this year on a renewed appetite for technology shares amid enthusiasm around artificial intelligence, continued economic strength, and expectations that the Federal Reserve will start easing policy. Sentiment has been so upbeat that it’s drawn comparisons across Wall Street to prior market bubbles like the tech boom of the late 1990s, spurring a debate over whether valuations are too high.