Overvalued Stocks Don't Make Piper Sandler Strategist Sweat: 'No Reason To Get Bearish'

Benzinga · 10/15 06:52

The stock market’s current overvaluation should not deter investors from holding onto their stocks, according to a recent note from Piper Sandler.

What Happened: Despite the S&P 500’s 8% overvaluation, investors should not be discouraged, Business Insider reported on Monday. This advice comes from the portfolio-strategy group at Piper Sandler, led by Chief Investment Strategist Michael Kantrowitz.

“An 8% over-valuation is no reason to get bearish. Stocks can remain at rich valuations as long as a ‘fear’ catalyst doesn’t arise from the usual suspects: interest rates, employment or inflation,” Kantrowitz said.

He suggested that without a sudden increase in interest rates, unemployment, or inflation, the stock market’s upward trend should continue, even if it is overvalued.

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Kantrowitz also recommended that investors focus on stocks with strong earnings momentum when building their portfolios, as these stocks are likely to outperform and maintain their high valuations for longer periods.

Why It Matters: The note from Piper Sandler comes amid a generally positive outlook for the stock market. Despite concerns about overvaluation, the market has continued its upward trend, with the S&P 500 and Dow Jones Industrial Average reaching new record highs on the back of strong earnings from major U.S. banks.

Earlier in September, JPMorgan strategists warned that the Federal Reserve’s anticipated rate cuts might not be enough to drive a new surge in the stock market, suggesting that other factors such as employment and inflation could play a significant role in the market’s future performance.

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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote