Wall Street controversy: JPMorgan Chase sees US stocks as a bubble, while Goldman Sachs supports the current rally as reasonable.

Zhitong App learned that Marco Kolanovic, the Chief Market Strategist at JPMorgan Chase, believes that the dramatic rebound in the U.S. stock market and Bitcoin's rapid breakthrough of the $60,000 mark are sending signals to him. He thinks these developments indicate a bubble building up in the market, which is typically a precursor to unsustainable rapid price increases.

Therefore, he has joined the increasing warnings on Wall Street, reminiscent of the late 1990s internet boom or the post-pandemic frenzy in 2021, when stock prices rapidly inflated and then burst.

Meanwhile, David Kostin from Goldman Sachs believes that this risky sentiment is justified, as he sees the high valuations of large tech companies supported by fundamentals.

Driven by the significant growth of U.S. tech giants, the Pro UltrPro Shrt S&Pro 500 continues to hit new highs, sparking anger among critics who believe the bullish trend won't last, while also exciting optimists who see more room for gains.

Marco Kolanovic is a key figure in the former group. In a report to clients on Monday, he wrote that the market continues to move forward under the push of "low volatility and bubble accumulation."

He stated, "Despite rising bond yields and fading rate cut expectations, the stock market is still up this year." "Investors may think that the increase in yields reflects an accelerating economy, but 2024 earnings forecasts are declining, and the market seems overly complacent about the cycle."

In contrast, Kostin from Goldman Sachs argues that this sudden rise in stock prices is different from other periods in history where prices surged abruptly, often exceeding their value. Unlike previous situations, the breadth of this "extreme valuation" is much smaller, with trading in stocks at these multiples sharply declining from the peak in 2021.

Furthermore, contrary to the "growth at all costs" mentality of 2021, "investors are primarily paying high valuations for the largest growth stocks in the index," he wrote in a report on Friday. "We believe the valuations of the seven major U.S. tech giants are supported by their fundamentals."

It is worth noting that among the seven giants, especially Nvidia (NVDA.US), Meta Platforms Inc. (META.US), and Microsoft (MSFT.US), have been leading and driving the rise of major stock indices this year. The Pro UltrPro Shrt S&Pro 500 has set 15 closing records in 2024, achieving growth for four consecutive months.

So far, financial performance has proven these moves to be reasonable. Data shows that the group's earnings per share grew by 59% in the fourth quarter compared to the same period last year, exceeding the expected 47%.However, for Colanovich, this environment is puzzling, reflecting investors' complacency and underestimation of risks.

He said, "The continued rise in the stock market may keep monetary policy at elevated levels for a longer period, as premature rate cuts could further boost asset prices or lead to a resurgence in inflation."