The hi tech boom and rational market euphoria

How long will it last? For months now, many have been wondering how much longer the stock market rally can continue, and while there is the fear that sooner or later the setback will come, the feeling is that this rally can continue for a long time because it is the trends that are driving it that will continue to push it.

After all, despite all the chaos around the world amidst wars, tariffs and the debt crisis of some countries, the stock markets continue to run undaunted, perhaps with a few interlocutory sessions, but subject to a volatility that, after shaking the indices for a moment with some momentary filings, just as quickly disappears. In short, it is not such as to change the underlying trend, at least so far. And here one does not have to look for many explanations to understand the market dynamics because there is only one sector driving the indices: technology (artificial intelligence, data centres, cyber, cloud, etc.).

They pass through any turbulence unscathed, the companies in the sector continue to grind out profits, they have been saying for months that they have reached the end of the road, that prices have reached stellar levels, but they continue to rise, passing through profit-taking and portfolio rotations on value stocks. They always set the pace.

Nvidia, the undisputed leader in the sector, as confirmed by the latest quarterly report, now capitalises more than many of the world's major stock exchanges (in some cases even put together) and the artificial intelligence business with all its applications is, according to many, only just beginning. Experience, however, teaches us that, especially on the stock market, nothing is and can be definitive, so some reflection on the possibility that the trend may be interrupted would be in order. This is not pessimism, it is healthy realism.

There was only one other period in history when there was a widespread feeling that we were on the eve of a new era: from the late 1990s to 2000. In fact, there was a new era, it still lasts today, and what we experience today is nothing more than its evolution. But 25 years ago, there were so many companies, they had insane price-earnings ratios, they had impossible-to-collect prospective profits, and there was what the then Federal Reserve Chairman Alan Greenspan in 1996 called 'irrational euphoria' not justified by the fundamentals, a kind of collective illusion because everything went up, indiscriminately.