U.S. equity markets are looking unattractive with a severe lack of the obvious investment opportunities, which is according to the portfolio manager at Smead Capital Management. The backdrop for U.S. equities is in some ways looks even less attractive than in 1999 during the run-up to the dotcom crash. This led to the S&P500 losing over a fifth of its value and the NASDAQ dropping by half.
Expanding the picture to consider rising longer-term yields in the U.S. and the increasing expectation of a series of interest rates hikes this year in the U.S., Smead also stated that the U.S. index has seen better days, even stating that investors would be “paying expensive broad prices with a marginal headwind of rats being in the face of stocks.”
One of the things that worries smead are the valuations of the larger tech companies, with the trifecta of Apple, Microsoft and Google Now, which is an equal to over 8 percent of the S&P index.
His concerns go beyond valuation, nothing that the highly supportive environment for tech stocks under Barack Obama’s presidency in this case Smead says the former administration allowed the sector to “have its way” is unlikely to continue.
Although President Donald Trump’s much tougher stance on the sector as well as an impeding change in the leadership at the Federal Communications Commission which could bring higher charges for many tach companies that they are unable to deliver to the consumers.