Bank of America: The bubble of the "seven giants" in the US stock market is still expanding! There is still room for further growth.

Bank of America Corp strategist said that the bubble formed by large US tech stocks in the past two years still has room to expand further, and investors should be prepared for more gains. The strategist team at Bank of America Corp led by Michael Hartnett studied 10 stock market bubbles since the last century and found that the average increase from the low point to the peak during these extreme high valuation periods was 244%. This means that the so-called "Magnificent Seven" stock portfolio, which has risen by 223% since the low point in March 2023, "still has room to move higher". The BofA strategist stated that current valuations also support the view that this stock portfolio could continue to rise. Previous stock market bubbles have typically ended when the price-to-earnings ratio reached 58 times, with these stocks trading 29% above their 200-day moving average at that time. The current seven stocks - Tesla, Inc. (TSLA.US), Alphabet (GOOGL.US), Apple Inc. (AAPL.US), Meta Platforms (META.US), Amazon.com, Inc. (AMZN.US), Microsoft Corporation (MSFT.US) and NVIDIA Corporation (NVDA.US) - have a price-to-earnings ratio of 39 times and are only 20% above their 200-day moving average. The strategists stated that this makes them the "ultimate representatives of the current bubble". Investors' enthusiasm for US tech giants has driven US stocks to new highs this year, with no sign of abating. After experiencing the impact of the Chinese artificial intelligence startup DeepSeek at the beginning of the year and the turmoil caused by the Trump administration's tariff policies, the "Magnificent Seven" quickly rebounded - the S&P 500 information technology index has surged 56% since the low point in April, and investors have continued to buy on dips during this period. A positive macroeconomic backdrop, continued frenzy surrounding artificial intelligence, and expectations of further rate cuts by the Federal Reserve are providing support for the tech sector. In fact, a fund manager survey released by Bank of America Corp this week showed that "long the Magnificent Seven" has been considered the "most crowded trade" by 42% of respondents for the second consecutive month. The BofA strategist pointed out that bubbles are often short-lived and highly concentrated. Looking back at 2000, when internet-related stocks soared to extreme levels, the tech sector rose 61% in six months, while all other sectors of the S&P 500 index declined. At the same time, investors should hedge their exposure to the tech bubble by holding some "value distressed" assets, with examples of such potential opportunities currently being in Brazil, the UK, and global energy stocks.