Economics

According to the most bullish investors the current bull market bears little resemblance to the tech bubble of 1999/2000.

That late-90s tech bubble was fueled by a Fear of Missing Out (FOMO), which was reflected in the very high price-to-earnings (P/E) multiples. Today’s bull market is accompanied by much more reasonable valuations suggesting that the rally is merely reflecting an equally steep increase in real earnings.

In early 2000, the tech sector’s forward P/E ratio stood at 55 times, and the broader S&P500 rose to 25 times forward earnings; today, the S&P500 sits on a forward P/E of 20.5 times and the tech sector on 23 times.

The bulls suggest an earnings-driven rally (as reflected in modest P/E ratios) is inherently more sustainable than one built on expanding hope and P/Es. continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Insightful Insights, Market commentary, Market Valuation.

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The Federal Labor Government’s 2026-27 Budget tax reform package represents the most sweeping overhaul of Australia’s investment tax landscape in nearly three decades. By winding back the traditional pillars of wealth creation – specifically the 50 per cent Capital Gains Tax (CGT) discount and negative gearing on established residential property – the government has fundamentally altered the math of investing.

While today’s major policy concessions (including exemptions for testamentary trusts and a step back from sweeping ministerial discretionary powers) provide some targeted relief, the core framework remains intact.

The clear takeaway for investors is a systemic structural shift: the traditional focus on heavily leveraged capital growth has been severely compromised, making high-yielding income generation far more appealing. continue…

by Roger Montgomery Posted in Aura Group, Economics, Editor's Pick, Feature Article, Insightful Insights, Investing Education, Popular, Property.

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If you want to know where the stock market might be headed, you have to look at the economic gravity being exerted by the bond market. Right now, U.S. stocks and bonds appear to be on a dangerous collision course.

Think of it in terms of a feedback loop: soaring stock prices have made U.S. households feel incredibly wealthy – with equity holdings sitting at a record 250 per cent of disposable income – which keeps consumer spending hot and inflation sticky. At the same time, tech giants are pouring billions into data centres, further heating up the economy.

As the new U.S. Federal Reserve Bank Chair, Kevin Warsh, just hinted, inflation won’t come down. So bond yields won’t drop until the stock market takes a meaningful breather to cool things off. continue…

by Roger Montgomery Posted in Economics, Global markets, Market commentary.

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In my latest Firstlinks article, I explore whether artificial intelligence (AI) is following the familiar path of past technology bubbles. As businesses shift from AI experimentation to demanding measurable returns, the question becomes whether the trillions spent on AI infrastructure will ultimately generate enough revenue to justify today’s lofty valuations.

You can read the article via Firstlinks here: Have AI’s four horseman arrived? continue…

by Roger Montgomery Posted in Economics, In the Press, Insightful Insights, Market commentary, Technology & Telecommunications.

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Proposed changes to negative gearing, capital gains tax (CGT) and new Australian Taxation Office (ATO) rules for holiday homes could significantly alter the economics of property investing in Australia. By reducing the tax advantages associated with property ownership, the changes may weaken demand across several investor groups and influence property prices over time.

Drawing on supply and demand principles, this whitepaper paper examines how investors, rentvesters, property flippers, holiday homeowners and discretionary trusts could be affected. It also explores the potential impact on borrowing capacity, resale demand and the attractiveness of established residential property compared with new builds. continue…

by Roger Montgomery Posted in Aura Group, Economics, Editor's Pick, Market commentary, Popular, Property, Whitepapers.

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“You cannot be afraid of new technologies. I think that this tenet passed Warren Buffett by. As he is the greatest investor of all time, I think it’s important to recognise that if he were not afraid of product cycles and obsolescence, he would have made much more these last few years than he did. Now, I know we shouldn’t criticise someone of his unbelievable prowess, but we must also recognise that it was wrong not to include technology stocks in the portfolio…[they] are creating too much wealth to ignore.”

With Musk now the world’s first recorded trillionaire after SpaceX’s float last Friday, you might be thinking the above quote has merit, especially as 60 per cent of Berkshire Hathaway’s portfolio is sitting in cash. 

But the above quote, by Jim Cramer, was made in January 2000, just three months before the Dot.Com crash wiped 76.81 per cent from the tech-heavy NASDAQ Composite index and investors saw an estimated US$5 trillion in paper wealth evaporate between 2000 and 2002. continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Global markets, Market commentary, Technology & Telecommunications.

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I joined Kirsten Aiken on ABC The Business to discuss the challenges facing Australia’s retail sector. With higher interest rates slowing the economy and uncertainty around proposed tax changes weighing on consumer confidence, spending has softened across age groups. We explored the pressures facing traditional retailers, the accelerating shift to online shopping, the impact of global competitors, and why department stores such as Myer and David Jones continue to face long-term challenges as consumer habits evolve.

Watch here: Challenges grow for the retail sector, Glue the latest to close. continue…

by Roger Montgomery Posted in Companies, Consumer discretionary, Economics, Editor's Pick, Insightful Insights, Market commentary.

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With stock markets recently retreating marginally from artificial intelligence (AI)-fuelled record highs, the question many thoughtful investors are asking is: Will the bull run resume, or is this the beginning of a broader correction?

Of course, we can’t be certain but what we can know is that as stock prices continue to soar, fears of an AI bubble will likewise increase.

Financial markets have performed spectacularly since late 2022, and equities have accelerated their gains this year just as structural stresses begin to appear and debates about sustainability begin to intensify. continue…

by Roger Montgomery Posted in Economics, Market commentary, Technology & Telecommunications.

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I joined ABC Weekend Breakfast to discuss the record-breaking SpaceX Initial Public Offering (IPO), which briefly pushed Elon Musk’s wealth beyond US$1 trillion and valued the company at more than US$2 trillion. We explored what drove the strong debut, why much of SpaceX’s revenue now comes from its AI and data centre businesses rather than its space operations, and how NASDAQ’s decision to fast-track the stock into its index could force ETFs and index funds to buy shares. We also discussed the potential impact of insider selling in the months ahead and what the IPO could mean for everyday investors. continue…

by Roger Montgomery Posted in Economics, Global markets, Market commentary, Popular, TV Appearances.

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The defining irony of today’s stock market has got to be the yawning chasm between asset prices and their intrinsic values. As equity indices scale ever higher peaks, and as hyper-parabolic Price-to-Earnings (P/E) and Price-to-Sales (P/S) ratios are normalised, the underlying truths don’t seem to have changed. Eventually even this bubble must bust.

U.S.-based senior economist at the Centre for Economic and Policy Research (CEPR) in Washington, DC, and author of the ‘AI Bubble Monitor’, and U.S.-based antitrust and policy analyst Matt Stoller reckon this dynamic can be attributed to something Stoller calls the “Number Go Up Rule”– a systematic rewiring of institutional incentives to ensure corporate valuations ascend at all costs, and frequently favouring speculative mania over fundamentally productive or socially additive enterprises. continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Global markets, Insightful Insights, Investing Education, Market commentary, Popular.

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