JPMorgan said the S&P 500 tech/AI exclusion index is not a disappointment.

stock strategist JP Morgan He was cautious about the stock’s outlook, arguing that even if technology/artificial intelligence is removed from the equation, the stock is no longer priced to disappoint.

”[‘Fear of Missing Out’] is in full swing, and there is a sense of complacency in stocks where the VIX index is at the low end of its range,” strategist Mislav Matejka and his team said in a research note sent to clients.

“All of this suggests that even if economic activity weakens in the second half of the year, it is likely that stock prices will ignore it or pass it by, compared to the current outlook for a no-landing or soft-landing. is low. Take the Tech/AI/FAANG group out of the equation completely.”

Far from it.

They estimate that the S&P 500 index has a forward price-to-earnings ratio of 19.4x, technology stocks at 27.3x, and non-tech/AI stocks, which make up 65% of the index, at 1.4x.

Historically, the median multiple was closer to 15.3x, which now carries a 10% premium.

At the October lows, when a recession was the base scenario, the S&P 500 index was trading at 15.3, the tech index was trading at 18.1, and the S&P 500 index (excluding tech) was trading at 14.5.

Similarly, current valuations need to be judged in the context of short-term interest rates that are “significantly higher” than what has been seen over the past 10 to 20 years, he said.

Additionally, when compared to bond yields, dividend yields have become less attractive compared to the average over the past 20 years across developed markets.

“The above considerations add to a much higher positioning and more optimistic sentiment than we saw at the beginning of the year.”