AI optimism is driving the S&P 500 price-to-book ratio to record levels, exceeding the dot-com era. Stock-market bulls believe AI will transform the economy, showing real profits unlike the internet boom. Bank of America strategist Michael Hartnett warns investors of high valuations, indicating potential market froth and the need for caution. Other classic valuation measures also show market froth, suggesting a bubble scenario. High valuations reflect expectations for future earnings, with many AI firms beating earnings expectations. Valuations are better predictors of long-term returns than short-term performance, with differing views on the market’s future direction. Chief investment officer Rick Rieder of BlackRock believes the market is in the “best investing environment ever.” If the market unwinds, bonds and non-US stocks may benefit, with funds such as AGG and VEU offering exposure to these trades.

Read more at Yahoo Finance: ‘It better be different this time’