Wall Street: Still Recommends Holding Stocks Despite Dot-Com Bubble Comparisons
nashnova research
The 10-year Treasury yield is approaching 5%, oil sits near $100, and rate-hike bets are rising — yet Wall Street's mainstream verdict is the same: stay invested. The logic: growth stocks can ride through tightening, and earnings growth provides a margin of safety.
With this much pressure, why hasn't the market broken?
The 10-year US Treasury yield is nearing 5%, its highest since 2007. WTI crude — the US benchmark oil price — is around $100 a barrel, pushed up by the ongoing Iran conflict.
The S&P 500 has barely moved since early June, but before that it rallied 11% over five straight months and posted double-digit gains in each of the past three years.
Last Friday, even after inflation data bolstered rate-hike expectations, stocks bounced back from a four-day slide. This means → the buy-the-dip reflex is still intact; selling pressure has not overwhelmed buyers.
Why are strategists invoking the dot-com bubble?
Chris Harvey, head of equity strategy at CIBC Capital Markets, points out that during the Fed's June 1999–May 2000 hiking cycle the Nasdaq 100 rose 59%, while financials and value stocks lagged.
In plain terms = the "rates up, stocks up" script has played out before — growth and tech powered through tightening then, and the bet is they can do it again.
Bank of America analysts echoed the view last week: "a strong growth narrative and a bubbly market" can overcome macro and rate headwinds. Both firms' implied verdict: this rally is not over yet.
What underpins the "stay invested" call?
The S&P 500 tech sector's forward P/E — valuation based on the next 12 months of expected earnings — has compressed from nearly 26× in early June to 20.5×, below its 10-year average of 23×. This means → a chunk of the valuation froth has already been squeezed out; stocks are cheaper now than a few months ago.
Bloomberg data show S&P 500 companies are expected to post a third consecutive quarter of 20%+ earnings growth in the upcoming reporting season.
Keith Lerner, chief investment strategist at Truist, says "earnings have overwhelmed" macro risks and judges that the bull market remains intact.
How costly is it to miss the final leg of a rally?
Michael Rosen, CIO at Angeles Investment Advisors, puts it bluntly: "The greater risk is missing the outsized returns of the last stretch of a bull market."
In plain terms = even if the bull market is near its end, stepping off and trying to get back on is nearly impossible — the cost of missing the move exceeds the cost of riding the volatility.
Roundhill strategist Drew Pettit compares the market to a duck: "calm on the surface, paddling furiously underneath." He advises investors who have already shifted into growth stocks to stay patient and wait for Q3 earnings in October.
Which signals are flashing caution?
The VIX — the Cboe volatility index that gauges market fear — sits low overall, but the gap between index-level and single-stock volatility has widened to a decade-plus high. This reflects a growing divergence beneath the surface calm.
Ned Davis Research data: equity investor sentiment has dipped only slightly to neutral, while bond-market sentiment has fallen to its lowest since 2022. This means → bonds are far more nervous than stocks; the two markets are telling different stories.
Alex Shahidi, co-CIO at Evoke Advisors, concedes: "Multiple major forces are occurring simultaneously, and the net effect is hard to predict." His response: add exposure to commodity producers and gold as a hedge.
What comes next?
October's Q3 earnings season is the key checkpoint — whether the earnings-growth thesis keeps delivering will determine if the "stay invested" call holds up.
If earnings disappoint, the "valuations have already pulled back so it's safe" argument unravels quickly; if they beat, the market likely pushes higher.
In plain terms = Wall Street is not betting on "no risk." It is betting that earnings growth outruns the risk. Q3 earnings are the moment of truth.
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