The enthusiasm for optimal job data seems to have faded a bit, while futures contracts are slipping and investors are looking for the next catalyst to drive this market higher. And in keeping with what we saw this year, technology will be heading south.
The Bahnsen Group’s chief investment officer, David Bahnsen, believes that the market is halfway through a technological setback, not on a “sudden and shocking decline of 30%, 40%, 50%, but that we are reaching a point , empirically and demonstratively, it requires repricing. ”
In us call of the day, Bahnsen told MarketWatch that investors may be blind to valuation risks for certain high-profile stocks, as price / earnings ratios have not been corrected to ‘normal or reasonable’.
‘
“There is not enough momentum, and currently there are not enough buyers who can support this level of appreciation.”
”
He draws up a bit of history as a guideline for what might happen.
Microsoft MSFT,
took 16 years to reach new heights and Cisco CSCO,
is not even close to its everyday high in 1999. ‘Intel INTC,
is basically right where it was in 1999, and yet all three companies have shattered it over the past 20 years, and earnings have grown double-digit per year for 20 years, ”he said. If stock prices do not move, it can only happen for one reason. The shares were too doomed. ‘
The message for the stocks that investors now like – the popular FAANG (Facebook FB,
Apple AAPL,
Amazon AMZN,
Netflix NFLX,
Google GOOGL in alphabetical order,
) names and companies such as Tesla TSLA,
– is that they can continue to grow and succeed and be profitable, but valuations can be normalized and share prices can go nowhere for a long time, Bahnsen warned.
One solution: look at old tech stalwarts 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,
things, but none of the companies can do anything they do without the processors of Intel, the chips, the servers, the mainframe, the hardware. ”
“The technological infrastructure we need is still dependent on Cisco, Intel and IBM,” he said, adding that patient investors waiting for these stocks to pay out slowly are still getting decent dividends from them.
Bahnsen is also big on the pent-up COVID-19 demand theme, believing that consumer products are not the most undervalued. He owns Procter & Gamble PG,
Kimberly-Clark KMB,
and Pepsi PEP,
three names that have not yet reached new highs continue to grow top and bottom lines, he said.
Reversal on corporate taxes?
US futures contracts ES00,
YM00,
NQ00,
slips to the Dow Jones Industrial Average DJIA,
and S&P 500 SPX,
both recorded record highs on Monday. European equities SXXP,
catching up with Wall Street profits while Asia was mixed, and China shares slipped after the central bank allegedly asked borrowers to curb lending growth this year.
Influential Democrat Senator Joe Manchin has warned that the proposed corporate tax rate in President Joe Biden’s infrastructure package is too high, and he will increase it to 25%, but not the 28% the bill calls for.
The Senate’s non-party MP decided on Monday to make a Democratic effort to pass more legislation through reconciliation, which means the party could have more Senate measures approved this year.
Swiss bank giant Credit Suisse CS,
CSGN,
will receive a $ 4.7 billion hit related to the collapse of Archegos Capital Management. It also cut its dividend and announced that its investment bank and risk officials would leave.
Inter-centric social gaming platform Roblox RBLX,
is in a sweet spot in the industry and Wall Street is taking notice.
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