'AI and tech FOMO looks to be kicking in' following lackluster retail flows since the end of February, Marco Iachini, Vanda's senior vice president of research, said in the note.īut it flagged that profit-taking could put downward pressure on some of the market's smaller and best-performing AI stocks such as C3.ai. The stock has soared about 160% this year. He also pointed to low volatility expectations as evidence of deep complacency among investors, and cautioned that sentiment is 'quickly hitting uber-bullish levels as FOMO stages a resurrection.Vanda said average investors are beginning to chase the boom in tech stocks by widening their purchases across more AI-sensitive names including Palantir, Marvell and UIPath and beyond large-cap issues.Īt the center of the AI investment frenzy is chipmaker Nvidia whose valuation this week pushed beyond $1 trillion. He noted the S&P 500's forward price-to-earnings multiple is 25% above its long-term average, and the index is heavily concentrated, as it was during the dot-com bubble. Moreover, the former chief North American economist at Merrill Lynch underlined the immense optimism priced into stocks. He described the fiscal support as 'the Energizer Bunny gift that just kept on giving.' Rosenberg suggested that aggressive federal spending last year may have pushed back the recession.

'And if that is the case, then it is the first time in recorded history that a fundamental bear market ended before the downturn even arrived.' 'You can believe the press headlines or you can believe the leading indicators - which suggest that we do indeed have a 99.15% chance of an official NBER-defined recession,' he said. He questioned whether current equity valuations are justified given the darkening economic backdrop.

Rosenberg underscored the disconnect between the stock-market milestone and softening labor market.

'This market continues to be nothing more than a short-term momentum play,' the veteran economist and Rosenberg Research president said in a morning note.

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