U.S. equities are still trading on the “expensive side” that continues to warrant caution, says Matt Maley. He’s the Chief Market Strategist at Miller Tabak.
Maley’s remarks on CNBC’s ‘Worldwide Exchange’
Many expect the U.S. central bank to turn less aggressive in the coming months, creating room for the S&P 500 index to rally from here. But Maley warns the reason why Fed might choose to be less hawkish, in itself, is bearish for the market.
The only reason why they wouldn’t be as aggressive is if we had a freezing up in the fixed income market like we did in 2018 and 2020 or if the economy slows down so much. Both of these instances take the stock market a lot lower.
The Federal Reserve, however, has already confirmed it will continue to raise rates until inflation has been tamed.
Maley expects earnings estimates to come down
The Miller Tabak expert is convinced the market has not priced in the double whammy of rising rates and shrinking balance sheet. This morning on CNBC’s “Worldwide Exchange”, he said:
We started the year at 22 times earnings. Now we’re at 18. That’s still on the expensive side. With GDP estimates cut in half over the last 6-8 months, it’s only a matter of time before earnings estimates come down. So, it really isn’t priced in.
Maley reiterated that we’re in a supply-driven inflation right now. It wasn’t good for the stocks in 1970, and it likely won’t be this time as well, he concluded.
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