Red-hot initial public offerings may offer another sign of froth in a rallying stock market that saw all three major U.S. benchmark indexes and a small-cap index hit all-time highs this past week.
The bottom half of the chart below, from Renaissance Macro Research, shows the performance of the IPOX 100 U.S. index, which tracks the performance of new listings, relative to the S&P 500
SPX,
“One example of market enthusiasm is the performance of IPOs relative to SPX,” wrote Jeff deGraaf, founder of Renaissance Macro Research, in a note.
“Simply put, IPOs have crushed the broader market, a sign of confidence that eventually can lead to the type of speculative excesses that become problematic for stocks,” he said.
Big post-listing gains for a trio of newly listed stocks last week — Airbnb Inc.
ABNB,
Need to Know: The IPO boom might look like 1999 but here’s how long history tells us the stock market rally has left to run, strategist says
The S&P 500 remains up more than 14% for the year to date, while the Dow Jones Industrial Average
DJIA,
The Nasdaq Composite
COMP,
More recently, previously neglected stock sectors have shone as investors looked past a renewed surge in COVID-19 cases to cheer progress toward vaccines and prospects for another yet-to-be-completed package of economic relief from Congress. The small-cap Russell 2000
RUT,