Are Stocks in a Bubble?

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– Zacks

  • (0:45) – Breaking Down The Stock Market Performance: Are We In A Bubble Market?
  • (7:30) – Learning From The Dot-com Boom
  • (17:00) – The Phases Of A Bubble: What Could Push Us Over The Edge?
  • (28:15) – How To Prepare Ahead Of Time: What Should You Do With Your Portfolio?
  • (43:45) – Episode Roundup:  MSFT, TSLA, QCOM, NVDA, RIVN, EOG, PHM, TOL, JPM, DE
  •                Podcast@Zacks.com

Welcome to Episode #292 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

This week, Tracey is going to solo to talk about bubbles.

With the S&P 500 hitting new highs nearly every day this fall, are stocks in a bubble? 

Tesla, NVIDIA and Microsoft are red-hot, invoking some deja-vu from older investors who remember the 1990s boom market dominated by Cisco, and day-trader favorite, QUALCOMM.

The Dot-Com Bubble

Older stock investors have vivid memories of the dot-com bubble.

It came at the end of an 18-year bull market in stocks which lasted from 1982 to 2000. The world was being revolutionized by the Internet, dot-coms and technology companies.

By the late 1990s, the “tech titans” of Microsoft, Cisco, Intel and Dell were must-owns.

Microsoft MSFT and Cisco CSCO weren’t dot-coms that made no money. These companies were blue chips that made billions.

Investors poured money into their shares.

From Jan 2, 1998 to Jan 3, 2000, Microsoft shares jumped 240%.

During that same time, Cisco, which was one of the hottest stocks of the decade gaining over 10,000%, was up another 447%.

But these weren’t even the hottest tech companies.

QUALCOMM QCOM was a day-trader favorite. During those 2 years, QUALCOMM shares jumped 2216%.

The 2021 Bull Rally

In 2021, Microsoft is back in the game as one of the FANGMAN stocks. Over the last 2 years, Microsoft shares have gained 126.4%.

And other Silicon Valley darlings are again in the spotlight.

Instead of it being Cisco, NVIDIA NVDA is one of the fan favorites. Over the last 2 years, NVIDIA shares are up 486.8%.

NVIDIA shares are trading with a forward P/E of 73.

But much like the late 1990s, who cares about P/Es? It’s all about the growth and innovation.

And nothing says “innovation” as much as Tesla TSLA. Not only is it in a new, emerging industry of electric vehicles, Tesla is also on the cutting edge of AI-technology.

In fact, many say Tesla isn’t a car company at all, it’s a technology company.

Tesla shares are up 1,367% over the last 2 years.

Tesla isn’t cheap. It trades with a forward P/E of 169.

Is There Anywhere to Hide During a Bubble?

QUALCOMM investors thought they were geniuses in 2000.

Wouldn’t you?

Instead, from 2000 to 2003, QUALCOMM shares fell 79%. Microsoft would not hit its 2000 highs again until 2013.

But no one can pick the top either. And no one can say whether Tesla, NVIDIA or Microsoft 2.0 are at the “top” again.

What else should you know about stock bubbles and investing during them?

Tune into this week’s podcast to find out.

[In full disclosure, Tracey owns shares of MSFT in her personal portfolio. She did not buy it during the dot-com bubble, however.]

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