Much of the recent pull-back in the US stock market appears to have reflected a concern that valuations in the technology sector are frothy. But we are a long way from the situation that prevailed at the peak of the dot com bubble. In March 2000 – the month in which technology shares peaked – the price/estimated operating earnings ratio of the S&P 500 biotech index was 46, more than twice its level of 20 or so today. And the valuation of the information technology sector on this metric was nearly four times as high.
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