Are We in for a Repeat of the Dot-Com Bubble on Nasdaq 100?

investing.com:

The Nasdaq 100 achieved remarkable gains of nearly 37% in the first half of the year, marking its best performance in over 20 years since 1999. This raises concerns about a potential repeat of the dot-com bubble, and this time primarily because of the Artificial Intelligence (AI) boom. Despite the absence of market panic, several factors suggest the possibility of a continued correction.

The Federal Reserve's firm stance on maintaining hawkish monetary policy is worth noting, with a potential interest rate hike expected in July. Additionally, there has been a significant outflow of capital from technology companies since June 21, reported by Bank of America at $2 billion, representing the largest drop in 10 weeks. Furthermore, upcoming U.S. economic data at the end of the week could significantly influence the Federal Reserve's decision.

The primary threats to market bulls are the Federal Reserve's actions and declining liquidity. The market currently indicates an approximate 80% probability of a 25bp interest rate hike at the next Fed meeting, which is considered the baseline scenario. Predictions also suggest maintaining interest rates between 5.25% and 5.55% until the end of the year.

Declining liquidity, often linked to capital outflows from the stock market, could also contribute to the declines. This time, the primary competition for risky assets may come from U.S. government bonds as they seek to address budgetary requirements following a deadlock over raising the debt limit.

Considering the ongoing balance sheet reduction, the Federal Reserve might be hesitant to boost liquidity solely to sustain gains on Wall Street.

Investors will closely monitor the upcoming release of important macroeconomic data from the