Heebie jeebies

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  By Guest Blogger Doug Rowat

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Veteran Wall Street analyst Walter Deemer once wrote a book, When the Time Comes to Buy, You Won’t Want To.

I confess, I haven’t read it because I only recently discovered Mr. Deemer (surprising, because I’m drawn to most wrinkly Wall Streeters), but boy, do I like the title.

Putting money to work is uncomfortable. When markets are struggling, finding reasons not to invest is easy: the market suddenly becomes filled with falling knives. But even when markets are doing well, the excuses not to invest come just as easy: the market suddenly becomes filled with bubbles.

Though markets have been doing very well over the past year, ‘AI bubble’ is perhaps the most cited reason for a looming market downturn. Tariffs and the Iran war also enter into the mix, but given the technology sector’s prominence, AI bubble remains the main investor concern.

But here’s some perspective on tech valuations that the media rarely highlights. The forward P/E for the S&P 500 Information Technology Sector Index, which contains all the usual AI suspects—Nvidia, Micron, Palantir, Microsoft, etc., is at a premium to the broader S&P 500, but when PEG ratios are considered (PEG ratios reflect what you’re paying for the growth, the lower the value the better) the Tech Index is actually significantly cheaper (highlighted in green in the table below).

Is tech expensive? Not when you value the growth

Source: FactSet

Yes, you have to be comfortable with tech’s projected earnings growth rates, which are north of 25% over the next few years, but with US$2.6 trillion and US$3.5 trillion (source: Gartner) expected to be spent on AI infrastructure, platforms, cybersecurity, etc. this year and next, are the growth rates unreasonable? But regardless, embracing tech’s implied growth is the risk that investors must take to achieve annualized returns that have been massively higher than those of the broader S&P 500 (again, see table).

But let’s further examine valuation bubbles. Looking at recent S&P 500 history, the biggest drawdowns for this index haven’t related to valuations at all:

• 2020: S&P 500 decline peak to trough: 28.4%. Reason for decline: global pandemic.
• 2022: S&P 500 decline peak to trough: 23.9%. Reason for decline: inflation.
• 2025: S&P 500 decline peak to trough: 18.9%. Reason for decline: trade policy, tariffs.

But, admittedly, charts don’t lie and when we look at the recent explosion in the S&P 500 Information Technology Index, investors should indeed be wary:

S&P 500 Information Technology Index: too much, too soon?

Source: FactSet

However, while charts don’t lie, I just did. The chart above doesn’t capture the price movement of even just the past month. Here’s where we actually stand now:

Apparently not

Source: FactSet

You get the idea. Timing the peak is impossible.

Investors fail constantly to anticipate the top of any rapidly accelerating market. To assume you’re gifted enough to repeatedly and accurately time a peak is dangerous. You’re just as likely to sell too early and miss considerable upside.

With respect to valuations, investors can decide for themselves whether the technology sector’s pricey. But valuations aren’t particularly predictive of downturns anyways. This is because markets almost always overshoot their historical valuation ranges and momentum becomes a very difficult factor to build into forecasts.

A better idea? Maintain a balanced and diversified portfolio with built-in AI and technology exposure.

Then let it ride.

Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Investment Advisor, Private Client Group, Raymond James Ltd.

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About the picture: “Here’s the latest of our pitti party,” writes Ryan. ” Bugz is on the right, 2 year old pocket pitti rescue. She is coming around nicely partly due to the excellent example provided by 13 year old Benji, on the left. He’s the best dog in the world ( in my opinion). In this pic they are enjoying a spring sunbeam warm enough to be comfy but too cold for bugs- er, i mean- insects ….”

To be in touch or send a picture of your beaast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2026/06/06/heebie-jeebies/