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Falling Magnificent 7 volatility suggests U.S. stock market not in a bubble - BofA

Published 02/21/2024, 10:08 AM
Updated 02/21/2024, 10:08 AM
© Reuters -- A decline in volatility in the so-called Magnificent 7 group of megacap stocks suggests that the U.S. stock market is not yet in a bubble, according to analysts at Bank of America Securities.

Shares in these companies -- Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Google-owner Alphabet (NASDAQ:GOOGL), Facebook-parent Meta Platforms (NASDAQ:META), Amazon (NASDAQ:AMZN), and Tesla (NASDAQ:TSLA) -- have surged over much of the last 12 months, accounting for more than 60% of the S&P 500's total return in 2023. The heavy concentration of wealth has fueled some concerns over possible risks to both the U.S. and global stock markets.

But in a note to clients on Wednesday, the Bank of America analysts noted the relative stability in these stocks suggests that an asset bubble, which is historically marked by volatility rising with prices, has yet to form.

"The decoupling between upside and downside vol in these stocks is reminiscent of the 2000s tech bubble, but earnings better meeting price-expectations and the asymmetry in [Magnificent 7]’s macro reaction function suggests that this trend may be more due to the pain trade still being higher," the Bank of America analysts wrote.

They flagged that "fragility risks" are still high due to pressures posed by "fickle liquidity" and broader market momentum. However, the analysts added that these risks are "not extreme."

Latest comments

So, if we are not in a bubble, why do most market analysts keep reminding us of the fact that we're not in one... Makes you think.
yeah but you'll also be complaining if the analysts didn't say anything about the market being in a bubble or not
of course we're in a bubble - just look at the top 5 tech stocks and then the other 4995- most have had a dreadful year - including Dow Transports index - the whole thing may well come crashing down after Nvidia release which has to be pristine in forward guidance and even then, the other tech stocks that are propping up the market are starting to struggle also. way too many similarities to 2000 and 1929 - on so many metrics - and as we're on the verge of entering a major global recession
LOL. You've been warning of a recession since 2022.
Buy now??? Roll the roulette Table, down even more. Stall on AI ?? Electric Cars?? Chips are being produced to take Jobs. GOV just put money into it
Wow, if you believe this BS you're really dumb!
perhaps Aaron you should find another way to invest your money since you think we are in a bubble.
hilarious seriously
off course, they want to transfer their positions to the last buyers
Haha this could be a Babylon Bee article
Bofa is he new goldman
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