How Today’s AI Rally Differs From the Dotcom Era, Per Jim Paulsen
Retired strategist Jim Paulsen argues many S&P 500 sectors now move largely independently of AI and tech stocks, unlike during the dotcom bubble.
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what happened
Retired strategist Jim Paulsen, in a note published Thursday, argues that the broader market now depends far less on technology leaders than it did in the late 1990s. He most recently served as chief investment strategist at the Leuthold Group.
According to his analysis, the price sensitivity of the S&P 500’s “Old Era” sectors to “New Era” stocks, meaning technology and communications companies, has recently fallen to roughly zero. During periods when AI shares sold off, many other sectors kept advancing. Low-volatility and dividend-focused stocks may offer shelter, and value stocks as well as small- and mid-cap shares also look less tied to tech leadership.
Paulsen still sees rising risks, including elevated valuations, narrow leadership and investor complacency. Even so, he believes a decline in AI-related stocks would not necessarily cause the kind of broad selloff that followed the dotcom bust in 2000.
why it matters
For markets, this suggests that concentration in a handful of tech leaders may weigh less on the overall index than before, though high valuations and correction risk remain visible.
instruments
prepared by the newsmetry newsroom with ai assistance from the sources listed below. not investment advice.
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