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LONDON – The Managing Director of Standard Chartered on Thursday warned that stock valuations appear to have reached unsustainable levels amid a period of what he described as “speculative hype”, warning that it is possible that a sale driven by technology spills over into other industries.
“There are indications that the stock market as a whole is sparkling, whether it be the different valuation multiples (which) would indicate that the markets are, certainly (in) certain aspects, are falling,” Bill said. Winters, CEO of Standard Chartered, at CNBC. Squawk Box Europe “Thursday.
“That doesn’t apply to banks, I’ll add very quickly. I’d say value stocks generally don’t seem to be very fully priced right now. But that’s the nature of the speculative hype we’re in. this moment, ”he added.
His comments come after U.S. futures linked to the Dow Jones Industrial Average closed at a record high on Wednesday and, as Federal Reserve Chairman Jerome Powell played down the threat of inflation.
Powell said it might take more than three years for prices to meet the inflationary targets of the US central bank. This was another sign that the Fed is planning to look beyond any near-term inflation hikes and will likely keep interest rates stable for some time.
Inflation fears have risen in recent weeks amid sharply rising bond yields as policymakers debate another round of economic relief during the current coronavirus crisis.
Winters, however, said he was not concerned about short-term inflation. The StanChart CEO said the combination of an ongoing “very accommodating” monetary policy and a “very substantial” fiscal boost, especially in the United States, could lead to a temporary pick-up in inflation.
“But for this to translate into real market volatility, it would probably take another exogenous shock,” he added.
Technical concerns
When asked if the surge in tech stocks could impact larger markets if they were to fall sharply, Winters replied, “It is possible. We all remember the dot-com bubble vividly and when the bubble bursts, of course, it hit the tech industry, dotcoms., really hard. “
“But it spilled over into the whole economy and some would say it even led – in hindsight – to a very mild recession, although it seemed quite acute at the time,” he continued. .
“I think there’s still a very active debate about the value of some of these tech stocks or tech giants. When we look at the aftermath of the dot-com bubble and the number of companies that have felt bubbling over there. ‘An era that faded into to have market values over $ 1 trillion, who can say they weren’t grotesquely undervalued at the peak of the dot com bubble and not the other way around? ”Winters said.
Earlier Thursday, StanChart reported a 57% drop in annual profit for 2020, missing analysts’ expectations.
The London-based lender said pre-tax profit was $ 1.61 billion, down from $ 3.71 billion in 2019 and the average of $ 1.85 billion analysts’ forecasts compiled by the bank.
StanChart also reinstated its dividend and reaffirmed its long-term profit goals.
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