Stock Market Bubble To Inflate Until 2025, Capital Economics' John Higgins Anticipates S&P 500 To Hit 6,500-Mark

John Higgins, the chief markets economist at Capital Economics, has forecasted that the current stock market bubble will continue to inflate until the end of 2025, with the S&P 500 index potentially reaching 6,500 points by then.

What Happened: Despite the ongoing bubble debate, Higgins said “We are sticking to our view that this [stock market bubble] will inflate through the end of next year. Our end-2025 forecast of 6,500 for the index is premised on its valuation reaching a similar level to its peak during the dot com mania,” reported Business Insider.

Higgins’ forecast is based on the current valuations and the potential economic benefits of generative artificial intelligence. He believes that the stock market bubble will continue to inflate until 2025, driven by the narrative around artificial intelligence.

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“It [is] impossible to know how quickly a bubble will inflate; how big it will get before it bursts; what will cause it to burst; and when it will burst. Nonetheless, our end-2025 and end-2026 forecasts for the S&P 500 are rooted in the idea that a bubble in the index will continue to inflate in the meantime against the backdrop of a modest rise in forward 12-month EPS,” Higgins said. 

Why It Matters: The stock market bubble has been a subject of much debate. Some experts have expressed concerns about the bubble bursting, while others have been more optimistic about the market’s future.

In a recent report, Gene Munster, a tech venture capitalist, dismissed fears of an imminent AI bubble burst, stating that the market was at the beginning of a 3-5 year tech run. Similarly, Todd Gordon, the founder of Inside Edge Capital, argued that it was too early to call the stock market a bubble, pointing to the potential for technological improvements to drive returns higher for investors.

However, some analysts have warned about the market concentration of tech giants, drawing parallels between the current market structure and the dot-com bubble of the early 2000s. The combined share of the MSCI USA Index’s top 10 stocks, including the prominent ‘Magnificent Seven’ technology giants, has escalated to a significant 29.3% in December, approaching the historical peak of 33.2% witnessed in June 2000, during the height of the dot-com bubble.

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