The stock market has been on a wild ride in recent years, with many investors wondering if we are in the midst of a bubble. Chas Craig, president of Meliora Capital, recently shared his thoughts on the current market environment in his column titled “Stay invested for long-term success.”
Craig draws lessons from the dot-com bubble era of the late 1990s, noting that while the S&P 500 fell by half once that bubble burst, it never fell below its Dec. 5, 1996 level. He emphasizes the importance of staying invested for the long term and avoiding market timing decisions.
Craig also highlights the significance of the “Magnificent 7” companies – Microsoft, Apple, Amazon, Nvidia, Alphabet, Meta, and Tesla – which have dominated the market in recent years. While these companies have seen varying fortunes in 2024, they still represent a significant portion of the S&P 500.
Despite concerns about market valuations, Craig believes that the Magnificent 7 companies do not appear to be in a bubble that must burst. He points to research from DataTrek Research, which suggests that while valuations are important, other signs of speculative excess must also be considered.
Looking back at historical bubbles, Craig notes that the current market environment does not exhibit the same extreme levels of investor confidence seen in past bubbles. He believes that the Magnificent 7 companies, with their dominant market positions and real earnings, are a contrast to more speculative corners of the market.
In his next column, Craig plans to explore this contrast further and delve into more speculative areas of the market. As investors navigate the ever-changing market landscape, Craig’s insights provide valuable perspective on the current state of the stock market.
