For stock enthusiasts, drawing parallels between the current market and the dotcom bubble is a pretty common activity.
But Bank of America Merrill Lynch doesn’t buy into those comparisons at all.
In their mind, the tech-driven stock rally is far more stable this time around — and the reason stretches far beyond valuation.
“This is not your parents’ tech bubble,” BAML chief US equity and quantitative strategist Savita Subramanian wrote in a client note.
The firm cites the robust levels of cash held by tech companies, which should only grow if President Donald Trump’s proposed repatriation tax holiday goes into effect. In fact, tech is the only sector in the S&P 500 index that carries more cash than debt on corporate balance sheets.
In another contrast to the 90s bubble, the proportion of investment funds with a tech focus is half of what it was around 2000. Further, tech IPOs now make up a far smaller portion of public offerings in the market, according to BAML.
A side-by-side analysis in BAML’s table below provides more data showing that the S&P 500 is less reliant on tech than it was in …read more
Source:: Businessinsider – Technology