Tags: Bernstein | stocks | bubble | disruptor

Richard Bernstein: Stocks Aren't in a Bubble

By    |   Wednesday, 25 June 2014 02:14 PM

There is plenty of evidence to indicate that stocks aren't in a bubble, despite their recent march to record highs, says Richard Bernstein, CEO of money management firm Bernstein Advisors.

"Euphoria is a typical late-cycle signal. Investors throw caution to the wind and try to maximize upside returns," he writes in the Financial Times.

At the same time, pension funds ignore prudence and weigh themselves down with equities. In addition, Wall Street strategists recommend overweighting stocks, and hedge funds borrow money to buy large amounts of shares, Bernstein says.

Editor’s Note:
New Warning - Stocks on Verge of Major Collapse

However, he argues, "We can find no data that conclusively support the notion that the U.S. stock market is in such a euphoric stage."

In fact, the numbers show that U.S. pension funds have among the lowest equity allocations in more than 30 years and are focusing on alternative assets rather than stocks, Bernstein explains.

Meanwhile, "a Bank of America Merrill Lynch indicator shows Wall Street strategists are recommending an underweight of equities," he writes. And a survey shows hedge funds "are neutrally positioned."

And Bernstein says "frothy" initial public offerings aren't a concern because they "seem limited to a relatively narrow universe of stocks."

Bernstein notes that investors are paying high prices for "disrupter" companies, which are those companies that "are supposedly changing the world and have no relationship to the economic cycle, to Washington or to geopolitical events."

"The enthusiasm for disrupter stocks seems manic, but the lack of enthusiasm for traditional equity risk presents opportunity," he adds.

"Whereas disrupter stocks sell at huge premiums to the overall market because investors believe the stocks’ successes are assured, traditional high beta stocks within the S&P 500 are selling at the cheapest relative valuations in the almost 30-year history of our data. Judging by these data, investors are historically scared about traditional market risk."

Many investors are still bullish on stocks.

"The market is partying on," Sam Wardwell, an investment strategist at Pioneer Investments, tells Bloomberg.

"Over a slightly longer-term basis, Fed tightening is not on the horizon, the corporate outlook is fine and if you look at dividend yields, stocks are attractive from a valuation point of view."

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

Related Stories:

© 2021 Newsmax Finance. All rights reserved.


StreetTalk
There is plenty of evidence to indicate that stocks aren't in a bubble, despite their recent march to record highs, says Richard Bernstein, CEO of money management firm Bernstein Advisors.
Bernstein, stocks, bubble, disruptor
400
2014-14-25
Wednesday, 25 June 2014 02:14 PM
Newsmax Media, Inc.
 
Newsmax TV Live
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved