The global head of equities at JPMorgan Asset Management says one of the most debated equity trades in the market today cannot be ignored or dismissed, as three indicators he watches most closely for signs of a peak have not yet fired.
In a new Bloomberg interview, Paul Quinsee says the fundamental backdrop supporting the tech trade remains too strong to fade, even though some warning signs are beginning to appear.
“You can’t ignore it, obviously, and you can’t just dismiss it. And yes, we see these warning signs. You see incredible interest in these ETFs booming. Those are things that worry those of us who have been around for a long time. But when you look at the fundamentals, they’re incredibly strong.”
Quinsee says history gives him a specific and disciplined framework for knowing when to actually get concerned, but he is not there yet.
“History tells us that these moves go on until, first of all, things get expensive. Secondly, volatility starts to pick up. That’s a real warning sign. And thirdly, the earnings revisions peak. That’s when you’ve got to really watch out. And that’s not yet what we’re seeing when it comes to semiconductors.”
Looking at valuations, the JPMorgan executive says the picture is mixed but not alarming on the metric that matters most.
“On things like price to book, price to sales, multiples are getting up there. But the earnings multiples are still, for many of these stocks, still single-digit. And that’s true in the US. It’s true in the rest of the world as well.”
As for volatility, Quinsee says the tech trade is already flashing a warning sign.
“Volatility is absolutely going up. You’re getting enormous moves every day in both directions. That’s a warning sign. Earnings momentum doesn’t seem like it’s peaking… Every data point we’ve seen in the last few weeks just fuels the fire. Things are getting better.”
Quinsee notes that the tech trade still has more room to run amid the massive AI CapEx allocated by hyperscalers.
“Driven, of course, by the root cause of it — the frontier models inflecting, hyperscaler investment going up every time you look at the numbers. That trend hasn’t yet changed.”
Earlier this week, fellow banking giant Morgan Stanley projected an $800 billion investment by mega-cap tech firms this year that could soar to $1.1 trillion in 2027.
Photo by Nicholas Cappello on Unsplash
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