Change in the Stock Markets: Is the New High the New Norm?

The stock markets are currently experiencing a dynamic sentiment characterized by rising portfolio values and optimistic investor sentiment. However, the metaphor of market exuberance suggests that this development may not be sustainable. Concerned investors are wondering when the gains from the AI-driven rally might be lost again. Stocks are currently being traded at prices reminiscent of the Dotcom era bubbles. Nevertheless, buying interest remains strong, although many are skeptical about the long-term viability of this development. Analysts at Bank of America, led by Savita Subramanian, emphasize that the S&P 500 deserves a premium for structural reasons. Today's economic landscape is fundamentally different from previous times: companies are more efficient, better organized, and more flexible in their cost structures. While valuations may seem expensive, the ongoing efficiency gains through AI and the political realignment towards increased domestic production justify the optimistic sentiment. The elimination of offshoring and the return to domestic production facilities following pandemic-related supply chain disruptions also contribute to stability. Growth is expected to be less volatile but more solid. Additionally, the Federal Reserve has adjusted the monetary policy framework so that solid profit growth remains possible. Thus, the historical comparison of risks may be promising, as current pricing better fits the present economic situation.