Stocks are pricier than any time since the dot-com bubble, even as earnings sour
U.S. stocks are trading at pricier valuations relative to corporate profits than at any point since the dot-com bubble in 2000 and these measures are flashing warning signs even when completely ignoring the short-term impact of the COVID-19 epidemic and instead focusing on next year’s economy, analysts warn.
“While we are encouraged by the stabilization of new COVID-19 cases and the massive stimulus put in place, stock market valuations are no longer as attractive,” wrote Jeff Buchbinder, equity strategist at LPL Financial, in a Wednesday research note, adding that he a “correction of 10-15% would not surprise us.”
“While it’s possible that 2020 forecasts have been cut enough, we are concerned that 2021 numbers now need to be cut more aggressively,” wrote Lori Calvanasi, head of U.S. equity strategy at RBC Capital Markets, in a Wednesday note to clients. She predicts 2021 earnings will ultimately come in at $153, with a pretty optimistic scenario of 3.2% real GDP growth in 2021, a 10-year U.S. Treasury yield TMUBMUSD10Y, 0.706% rising to between 1% and 1.
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