BofA Warns: ’This Better Not Be Another Dotcom Bubble’ as Stock Valuations Hit Alarming Highs

Wall Street’s flashing warning signs—again. Bank of America’s latest analysis draws eerie parallels between today’s soaring stock valuations and the pre-crash frenzy of the dotcom era. ‘It better be different this time,’ they caution. But traders? They’re still buying.

### The Ghost of Bubbles Past

P/E ratios are partying like it’s 1999. Tech stocks lead the charge, with AI hype replacing the old ‘.com’ buzzwords. Fundamentals? Optional.

### Liquidity Tsunami or Reality Check?

The Fed’s punchbowl hasn’t been taken away—yet. But when the music stops, will anyone be left holding bags? (Spoiler: Probably retail investors.)

### The Cynic’s Corner

‘This time is different’—the four most expensive words in finance. Bonus jab: At least the dotcom bubble gave us petfood.com. Today’s ‘disruptors’ can’t even meme their way to profitability.

BofA Global Research

"If not different this time, bonds get some love," Hartnett wrote; international stocks would be favored over the S&P 500 too.

Investors appear "pumped" with expectations the Fed could soon join the "central bank rate cut party," with valuations being the only hurdle to pushing corporate bonds and stocks higher, he said. Traders are currently pricing in a roughly 87% chance the Fed will cut rates at its next meeting in September, according to the CME Group’s FedWatch tool.

However, a sharp pivot from the central's bank recent policy stance could also give rise to fresh debates on the central bank's independence, and "disruption [equals] debasement," Hartnett said, suggesting a policy disruption could drive the U.S. dollar index below 90 and push investors to seek inflation and currency devaluation hedges in gold, crypto, and emerging markets in the second half of the 2020s. The U.S. dollar index, which measures the relative strength of the dollar compared to other currencies, has declined more than 9% this year, at around 98 as of Friday afternoon.

A weaker dollar might prove useful for the TRUMP administration to see a "'25/'26 boom & bubble," Hartnett said, which he added could be an easy way "to reverse path of US debt & deficit trends."