Enthusiasm over bullish job numbers seems to have faded a bit, with stock futures declining and investors looking for the next catalyst to take this market higher. And in line with what we’ve seen this year, technology will lead the way south.
The Bahnsen Group’s chief investment officer, David Bahnsen, believes the markets are in the midst of a technology downturn, not heading for a “ sudden and shocking drop of 30%, 40%, 50%, but that we are at one point. empirical and demonstrative, that requires a new price. “
In our call of the dayBahnsen tells MarketWatch that investors may be blind to valuation risks for certain high-profile stocks, as price-to-earnings ratios have not been corrected to anything “normal or reasonable.”
“There is not enough momentum, there are currently not enough buyers to support this level of valuation.”
He brings up some history as a guide to what can happen.
Microsoft MSFT,
took 16 years to create new highs and Cisco CSCO,
isn’t even close to its all-time high in 1999. “Intel INTC,
is actually exactly where it was in 1999, and yet all three companies have crushed it for the past 20 years, while profits have been growing at double digits a year for 20 years, ”he said. “If stock prices don’t move, it can only happen for one reason. Stocks were too damn high. “
The message for the stocks that investors are loving right now – the popular FAANG (Facebook FB,
Apple AAPL,
Amazon AMZN,
Netflix NFLX,
Google GOOGL, owned by Alphabet,
names and companies such as Tesla TSLA,
– is that they can continue to grow and succeed and be profitable, yet valuations can be normalized and stock prices can “lead nowhere for a long time,” Bahnsen warned.
One solution: look at old techies like IBM IBM,
Cisco CSCO,
and Intel INTC,
“They are literally stable cash flow generators who have call options for their future,” he said. “They have new and exciting technologies that are not in the Netflix NFLX,
and Facebook FB,
camp and certainly not the Tesla and Snowflake SNOW,
camp of things, but none of those companies can do anything without the Intel processors, the chips, the servers, the mainframe, the hardware. ”
“The technology infrastructure we need still depends on Cisco, Intel and IBM,” he said, adding that patient investors who wait for these shares to slowly pay out are still getting decent dividends from them.
Bahnsen is also big on the pent-up COVID-19 demand theme and believes that consumer staples are the most undervalued in the market. He owns Procter & Gamble PG,
Kimberly-Clark KMB,
and Pepsi PEP,
three names that haven’t made new highs, but still keep growing, both at the top and bottom, he said.
Pushback on corporate tax?
US Equity Futures ES00,
YM00,
NQ00,
slipping after the Dow Jones Industrial Average DJIA,
and S&P 500 SPX,
both reached record highs on Monday. European shares SXXP,
are catching up on Wall Street gains, while Asia was mixed, with Chinese stocks falling after the central bank reportedly asked lenders to curb loan growth this year.
Influential Democrat Senator Joe Manchin warned that the proposed corporate tax rate in President Joe Biden’s infrastructure package is too high, and he would raise it to 25%, but not the 28% the bill calls for.
The impartial Senate MP on Monday ruled for a democratic attempt to pass more legislation through reconciliation, meaning the party could get more measures in the Senate this year.
Swiss banking giant Credit Suisse CS,
CSGN,
will take a hit of $ 4.7 billion in connection with the collapse of Archegos Capital Management. It also cut its dividend and announced that its investment banking and risk chiefs will be leaving.
Tween-centric social gaming platform Roblox RBLX,
is in a good industry and Wall Street is eyeing this.
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