Jeremy Siegel – The Market is Not in a Bubble

Jeremy SiegelAmid fears of a recession, the S&P 500 is up more than 14% this year, and artificial intelligence (AI) stocks have risen many times more than that. But the market is not in a bubble, according to Jeremy Siegel.

Siegel is the Russell E. Palmer Emeritus Professor of Finance at the Wharton School of the University of Pennsylvania and a senior investment strategy advisor to Wisdom Tree Funds. He spoke yesterday via a webinar hosted by Wisdom Tree.

The focus of his talk was AI, but I’ll cover his remarks about the market first.

Valuations are “miles away” from those at the peak of the dot-com era, Siegel said. “These are real companies,” he said, and not the product-less dreams of dot-com entrepreneurs.

The price-earnings ratio of the Nasdaq is 30, versus 100 that it reached during the dot-com peak, according to Siegel. The P/E of the technology sector of the S&P 500 was 80 then, versus approximately 35 now. Interest rates were much higher then, with TIPS yields at 4%.

“We use the term bubble too quickly,” he said. That term should apply to valuations that are 200% to 400% above fair value, which might not even apply to Nvidia, he said. That stock has tripled since late last year when the AI boom started to gain popularity.