EBC Markets Briefing | US stocks edge up with high valuations
Wall Street indexes closed up on Monday with the Nasdaq 100 leading gains despite a standoff between Republicans and Democrats over funding raising the prospect of a government shutdown beginning Wednesday.
Global equities are likely to extend a rally into the year end given a resilient US economy, supportive valuations and a dovish pivot from the Fed, according to Goldman Sachs strategists.
They also raised their target for the S&P 500 earlier this month, expecting it to gain another 2% to 6,800 points over three months. Fed Chair Powell on Tuesday noted that asset prices were at elevated levels.
Wall Street analysts also say shunning stocks because they appear "expensive" is a strategy that fails to stand the test of time. A research shows the average valuation range has leaped over the course of this century.
That is a potential offset to bearish arguments that today's AI frenzy is destined to end like the Internet boom and bust of the late 1990s when interest rates even exceed today's levels.
According to the BofA, less financial leverage, lower earnings volatility, increased efficiency and more stable margins than in decades past help to support benchmark index's higher multiples.
The S&P 500 remains skewed towards upside risks following the recent pullback. We expect it to retest the resistance of 6,700 in the near term if upcoming job report does not disappoint.
EBC Financial Group Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC Global Financial Collaboration or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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