It s not exactly a surprise there are a number of signs pointing to historic overextension not only at the top of the indexes, but throughout much of the market. And just as the laws of physics dictate how high something can be built without buckling over, there are loose axioms around how overextended valuations can get. Without the buttress of low yields as the economy recovers, price multiples are looking as if they re on an unstable foundation.
These market axioms are based on precedent. And for Jonathan Coleman, a small- and mid-cap portfolio manager at Janus Henderson, which manages $364 billion in assets, the past is illustrating how extreme investor euphoria and the valuations it is pushing up currently are.
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Michael Oh, manager of the Matthews Asia Innovators Fund, shared 3 firms he likes over 5-10 years.
Oh also broke down for Insider the 4 pillars of his investing strategy.
He highlighted some of the structural trends that will fuel growth in Asia going forward.
Benchmark indexes tracking Asian markets are inefficient, according to Michael Oh. With their allocations to big banks and industrials firms, the indices look backwards and don t generate the returns a future-focused strategy can, the manager of the Matthews Asia Innovators Fund told Insider on Monday.
According to Luke Lloyd, an investment strategist at Strategic Wealth Partners, such a pullback is a healthy thing near all-time highs, and investors shouldn t sweat it.
At the end of the day, tech stocks are still a good investment, he said, and they can justify the high valuations that have led some to cry of a bubble. Especially consider valuations of some stocks tied to an economic reopening, like airlines and cruise lines. A lot of these [reopening] stocks from a valuation standpoint are higher than they were the day before the pandemic. The thing is, they re not making any money, Lloyd told Insider last week. The cruise lines, for example, aren t even offering any cruises. Air traffic isn t getting anywhere close to where it was before the pandemic.
Value stocks have gained steam in recent months as an economic recovery sits in sight.
Rob Arnott says value stocks in the UK and emerging markets are the most attractive.
The founder of Research Affiliates called them potentially the trades of the decade.
In 2019 and 2020, the COVID-19 pandemic sunk stock prices around the world as the global economy shut down.
Anticipatory and brave investors seized opportunities in cyclical and cheaper value stocks as recessions and bear markets briefly took hold.
These became consensus trades, however, since multiple effective vaccines were discovered at the end of last year, sending stocks especially economically-sensitive ones soaring. Read research from just about any market strategist at the major banks, and you ll find they re all bullish on the recovery trade.
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Economist David Rosenberg is warning that the S&P 500 is due for lackluster returns this year.
He said the S&P 500 s most expensive stocks could see a median 30% drop, like in the dot-com bubble.
He laid out in several charts how extreme investor euphoria has become.
Investor euphoria has seemed to reach a particular level of bizarreness this year.
Stock indices are at all-time-highs despite an uneven economic recovery and the risk that new strains of COVID-19 may prolong the global pandemic.