"Wall Street's most accurate analyst" warns: giant IPO may lead US stocks to repeat the history of a century of bubbles.

Michael Hartnett, chief strategist at Bank of America, known as the "most accurate analyst on Wall Street," said on Friday that planned mega IPOs like SpaceX and OpenAI could push the weight of tech stocks in benchmark indices to levels of concentration not seen since past market bubbles. Currently, SpaceX, owned by the world's richest man, Musk, has planned the largest IPO in history, while the developer of ChatGPT, OpenAI, is attempting to go public before its competitor, Anthropic. These massive stock issuance plans will further fuel optimism in the market for technology and artificial intelligence, which has already led to the most concentrated bull market in decades. "With sharp price movements, blind retail frenzy, and persistent low volatility... everything feels like a bubble," Hartnett said in a report. "If combined with giant AI IPOs, market concentration could easily surpass bubble levels seen in the 'roaring 20s,' 'the beautiful 50s of the 70s,' 'Japan of the 80s,' and the 'TMT era of the 90s.'" Currently, the tech sector's weight in the S&P 500 index exceeds 44%. This further concentration could pose more challenges for asset managers - they may not be able to fully replicate these weights in their portfolios due to risk control constraints. Additionally, stock indices heavily skewed towards surging tech sectors also hide the risks of underlying weakness in sectors more directly related to the economy, such as consumer and financial stocks. Hartnett pointed out that major IPOs in history, such as Saudi Aramco and Meta, eventually proved to have little impact on the overall market trend. However, after IPOs signaling a market peak, such as Visa and AIA Group, the overall market tends to perform poorly in the subsequent 9 to 12 months. Rising bond yields are a sign of the end of prosperity and bubbles Hartnett believes that the rising bond yields are a sign of the end of prosperity and bubbles. Last year, he accurately predicted the outperformance of international stocks over the US market, and his bullish stance on commodities has also paid off. This time, he views two ETFs under JPMorgan Chase as a barometer of how bond yields influence the stock market. Hartnett said that if biotech ETFs, usually seen as speculative assets, fall to $120, it indicates that bond yields are still rising; and if retail-tracking ETFs rise to $85, it indicates that the impact related to bonds has been postponed. Hartnett said that the bullish sentiment in the market is approaching extreme levels, triggering a sell-off signal in the stock market. A survey of fund managers released earlier this week by Bank of America showed that investors' allocation to stocks this month hit a historical record high, prompting Hartnett to once again warn that the stock market seems poised for a pullback. He said in the latest report, "Bullish sentiment in the market in terms of positions and profits has reached a consensus peak, coupled with rising yields, suggesting that profit-taking may be looming." However, he also added, "No one will reduce their long positions before the historic IPOs, and true policy tightening will come after CPI reaches 4-5% in the coming months." This article was reprinted from Cailian Press, GMTEight editor: Chen Wenfang.