Pirondini (Amundi Us): 'Dangerous valuations: there is a speculative bubble on the Magnificent 7'
by Morya Longo
3' min read
3' min read
"In some sectors of the financial markets I believe there are speculative bubbles. Today, the Wall Street index is concentrated on a few companies as never before in history: 34% of the S&P 500 is made up of only 10 companies. This, in my opinion, is a risk factor with 500 red lights. In the past, when the stock market exceeded certain concentration thresholds, normalisation always came". Marco Pirondini, chief investment officer of Amundi Us, goes against the tide and speaks openly of a speculative bubble on big tech. "Wall Street's rally has been limited to a few companies, such as the magnificent 7," he observes. "But with rate levels so high, I believe their valuations are dangerous. By now, the time horizons of investors are too short: this pushes traders to focus on the details, but to lose sight of the elephant in the room'.
Let's start with the elephant then. In fact, from the seven elephants. The high valuations are justified by the fact that these are not new companies, as was often the case during the 2000 bubble. Here we are talking about giants grinding out tens of billions in profits every quarter. Strong realities, in short.
True, but that does not mean that there are no risks. For example: what will be the role of regulation on these companies? Will it always be accepted by the public and politicians that these big tech companies make so much profit and are so powerful? I mean that dynamics may emerge in the future that can change the growth rate of their profits. Think of Intel: it used to be a monopolist, today it has lost its edge. Are we sure that the same thing cannot happen to the other big techs?
Are there other slices of the market at risk?
Spread products, such as corporate bonds. Because, despite high rates, spreads are very low. This is a cause for concern, so we underweight the sector.
