While the U.S. normally operates as a defensive market heading into an economic downturn, that playbook may not work this time around, warned Credit Suisse's global equity strategist Andrew Garthwaite. "If we look at measures of normalized earnings such as the Shiller P/E then the US is at the top end of its range," Garthwaite said. "We struggle to believe that the US at currently [circa] 60% of global market cap can continue its inexorable rise.
market is essentially overexposed to these seven stocks, which are seeing "extreme levels" for relative valuations, he said, in a note to clients that advised investors to underweight U.S. stocks. While Credit Suisse is still bullish on tech stocks, current high price-to-earnings multiples for the Magnificent 7 will be difficult to maintain, he said.