BMO's Ablin: Stocks Could Be Headed to 'Bubble Territory' Like in 1999

The six-year bull market for stocks has further room to run, just like the market in the late 1990s, but we could be approaching a bubble similar to 1999 to 2000, says Jack Ablin, chief investment officer at BMO Private Bank.

Just like the 1990s, commodity prices are falling, the dollar is rising, the U.S. economy is stronger than many economies overseas and there's massive foreign inflow to stocks, he tells CNBC. The dollar is rising against the euro, while oil prices are falling.

All of this sets the stage for higher stock prices this year, Ablin said. The S&P 500 climbed 11.5 percent last year.

"If the price-to-sales ratio — which is around 1.7, 1.8 now — gets to be over 2 times, then I would say we're in that same bubble territory we were at in the tech bubble of 1999, 2000," Ablin argues.

"I do think there are lingering problems we're not aware of, very similar to the late '90s. [And I think] that we will start to see some of the evidence of those stresses come to light this year. We just have to see how severe they are, or if we learned our lesson 20 years ago."

Meanwhile, Ambrose Evans-Pritchard, international business editor for The Telegraph, sees stocks plunging 20 percent this year.

The move will be triggered largely by economic weakness overseas, he writes. "The eurozone will be in deflation by February, forlornly trying to ignite its damp wood by rubbing stones."

As for U.S. stocks, "the S&P 500 will not defy monetary gravity or the feedback loops of global stress for much longer," Evans-Pritchard says. He notes that about 50 percent of revenue for large U.S. companies comes from overseas. So a stronger dollar will hurt those companies.

"The S&P index measuring the price-to-sales ratio is higher today than at its pre-Lehman peak. Expect a shake-out of 20 percent, comparable to . . . 1998, . . . though don't be shocked by worse," Evans-Pritchard writes.

Please share this article