Evercore ISI’s Julian Emanuel thinks Nvidia’s monster rally is fueling a fear of missing out in the market.
He finds clients, including many who traded through the dot-com boom and subsequent collapse, are more worried about being underinvested than overexposed right now.
“That’s the first time that’s happened since 2021 for us,” the firm’s senior managing director said on CNBC’s “Fast Money” on Monday. “That’s a bit of an alarm bell.”
In his Sunday note, Emanuel warned clients there are similarities to Y2K emerging, particularly when it comes to momentum. This time around, he cites excitement around artificial intelligence and the idea the U.S. will avoid a recession as major catalysts.
“The sentiment is very, very bullish. The bears have been eliminated,” he told CNBC’s Melissa Lee. “It’s time to think more about risk than reward until we get just a little cooling off.”
On Monday, the Dow closed at an all-time high to 38,797.38. The tech-heavy Nasdaq Composite is up 6% so far this year and is less than 2% off its record high.
Meanwhile, Nvidia, the global leader in artificial intelligence chips, is up 46% so far this year and 240% over the past year.
Emanuel thinks stocks could go through a 13% pullback this year, which he considers normal during a nonrecession period. “If you can’t see yourself being a buyer down there, you should probably lighten up a little bit,” said Emanuel.
However, he hasn’t completely ignored the winning growth trade.
“We have been on board in pieces,” he said. “We like communication services. It’s been a great sector. We think there are defensive properties.”
Emanuel’s top picks also include consumer staples, health care and money markets.
“At the end of the day, you’re still making 5% on cash,” he added.
His S&P 500 year-end target is 4,750, which implies a roughly 5% loss from Monday’s close.
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