Is it 1999 again? Finding Opportunity Amidst Irrational Exuberance

Sid Queler

April 12, 2021

Is your portfolio positioned to benefit from improving economic growth and rising interest rates?

There are many variations of George Santayana’s statement, “Those who cannot remember the past are condemned to repeat it.”[1]  A notable version came from novelist Kurt Vonnegut who wrote, “I’ve got news for Mr. Santayana: We’re doomed to repeat the past no matter what. That’s what it is to be alive.”[2]

When irrational exuberance seizes investors and the valuations of some assets rise to exceptional levels, as they have today, it’s easy to understand Mr. Vonnegut’s point of view. However, asset bubbles don’t “doom” experienced investors—far from it. Bubbles often create value disparities and investment opportunities for patient, disciplined investors.

Irrational exuberance abounds

During 2020-21, we saw wildly optimistic investors disregard fundamentals and push asset prices well beyond fair market value. Their actions bring to mind the dot-com bubble of 1999-2000. Recent examples of irrational exuberance include:

Meme stock speculation

In recent months, shares of inexpensive stocks with relatively weak fundamentals climbed to new highs as investors acted on social media investment tips. So-called “meme stocks” experienced rapid growth driven by internet hype.

Enthusiasm for bankrupt companies

Investors inexplicably embraced bankrupt companies last year. In one case, the share price of a company dropped from a $16 high in early January 2020 to a post-bankruptcy $0.55 in early June 2020.[3] But the share price rebounded almost 1,000% when inexperienced investors decided the company represented good value.

Extreme share price valuations

Another example of remarkable optimism is found in the share price of an iconic automaker. In early 2021, the company’s market capitalization was higher than the combined worth of the next five global automakers combined.[4] By one analyst’s calculations, the company’s market capitalization valued every car the company manufactured at $1.4 million. The value of large automakers, typically, is in the range of $5,000 to $20,000 per car produced.[5]

Initial public offering (IPO) frenzy

A record number of IPOs (480) came to market in 2020.[6] More than 70% have lost value. The previous record for IPO issuance was set in 2000, and about 70% lost value then, too.[7] 

The argument has been made that high current valuations are the result of low interest rates. There is little question that historically low rates have caused investors to opt for riskier assets than they might have selected otherwise. Regardless, current valuations for some companies’ shares are well beyond fair market value.

Opportunities in current markets

Recently, investors’ passion for high-multiple technology stocks cooled as U.S. Treasury rates rose.[8] As economic growth resumes and interest rates rise, we anticipate that investors will benefit from exposure to:

Global value stocks

Value stocks underperformed growth stocks for more than a decade.[9] As rates rise, the value of future earnings for growth stocks, including tech companies, is likely to fall. This change may benefit value stock investors.

Emerging markets shares

Fiscal and monetary stimulus tend to help performance in emerging markets. In addition, if the U.S. dollar weakens as expected, emerging market shares may benefit.

Economically sensitive market sectors and real assets also may present opportunities for investors who want to gear their portfolios toward strong, cyclical recovery.

If you would like to learn more about adjusting portfolio allocations to take advantage of current market opportunities, email Sid Queler or give him a call at 617-531-6954.

Sidney F. Queler is the chief growth officer of CIBC Private Wealth, US. In this role, he leads the firm’s business development team, setting strategies and practices that broaden relationships with individuals, families, foundations and endowments. Sid also serves as a member of the CIBC Private Wealth Operating Committee and as a member of the advisory team for the firm's Boston office. In addition to leading local business development, he remains actively involved with client relationships.

1. Santayana, G. (1905). “Life of Reason: Or, the phases of human progress—all five volumes, complete and unabridged” (Vol. 1: “Reason in Common Sense,” Page 65). Pantianos Publishing.
2. Vonnegut, K. (2011). “Bluebeard” (Page 100). Dial Press Trade.
3. Hertz global holdings Inc (HTZGQ) stock historical prices & amp; data. (2021, March 10). Retrieved March 10, 2021, from,
4. Largest automakers by market capitalization. (2021, March 10). Retrieved March 10, 2021, from
5. Green, T. (2021, January 9). “Tesla's crazy valuation in 1 chart.” Retrieved March 10, 2021, from
6. All 2020 IPOs. (2021). Retrieved March 10, 2021, from
7. Lamensdorf, B. (2021, February 18). “Near-record proportion of IPOs losing money is sign of trouble.” Retrieved March 10, 2021, from
8. Levisohn, B. (2021, March 07). “The reflation trade is stirring growing pains in growth stocks. Here's why.” Retrieved March 10, 2021, from
9. Russell U.S. Style Indexes. (2021, March 10). Retrieved March 10, 2021, from