Billionaire investor and Dallas Mavericks owner Mark Cuban on Wednesday told CNBC that the recent surge in stock valuation isn't reminiscent of the 1990s dot-com boom.
A Different Scenario, Cuban Says
"Interest rates were a lot different back then," Cuban said. "And you saw a lot more people participating in the market...you don't see that now. That individual day trading really led the market to be frothy."
Cuban sold his internet radio startup Broadcast.com to Yahoo! Inc. for $5.04 billion in 1999.
According to Cuban, day-trading has made way for index funds, creating a different scenario altogether.
"There's so much money chasing index funds, so as long as those funds keep on growing, the market is going to go up," Cuban told CNBC.
Interest Rates Will Determine The Future
Noting the stark reduction in the Federal Reserve rates from 1999 to now, Cuban said that if rates remain this low, "where else are you going to put your money?"
"I think interest rates will tell us what's going to happen next in the market," Cuban told CNBC.
The current Fed interest rates are 1.5% to 1.75%, compared to 4.75% in early 1999.
The Fed has signaled it doesn't intend to cut the benchmark rate in 2020. President Donald Trump has continued to call on the Fed to cut the rates, saying it is holding back the stock market and the GDP growth.
The S&P 500 index is up 2.82% this year, the Dow Jones Industrial Average is 2.27% higher, and the NASDAQ Composite Index is up 4.58%.
Photo Credit: Public domain photo via Wikimedia.
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