Stock valuations are soaring ahead of profit expectations, and investors should"come to their senses" and let prices cool, Ed Yardeni, president of Yardeni Research, said in a Monday note.
Equity prices are outpacing expectations for near-term profits, forming a price-earnings melt-up many have likened to the dot-com bubble of the late 1990s. The rally grew even more vulnerable through the start of earnings season as analysts' earnings estimates fell. The index's forward price-sales ratio recently flashed a similar warning sign. The metric reached a record 2.32 in the week ended July 16, handily beating its past two cyclical highs. Investors could be in for a world of hurt if the decoupling of prices from profit forecasts carries on, Yardeni said.
Various economic risks also threaten the run-up, the strategist warned. The US economic recovery can be slowed or even derailed by rising COVID-19 infection counts or a failure to pass additional economic stimulus on time. Separately, schools' possible shift to online classes could create"a serious problem for parents' ability to return to work," Yardeni said. An additional semester of online classes at colleges would slam nearby small businesses, he added.
Where else would you invest, if not the stock market.
Stop worrying about all of this and INVEST for the long term instead. Always check the company fundamentals!
Just keep printing that money America.
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