Asset Valuations Are 'Strong' But We Remain 'Comfortable' - PIMCO

John Studzinski, vice chairman of asset management firm PIMCO, believes that asset valuations remain “strong” but his team is still “comfortable” as they reflect the recovery that is expected in the third and fourth quarter.

“There’s no question the current market reflects what people feel is going to be a reasonable amount of fiscal and monetary purchasing program support,” Studzinski told CNBC.

Studzinski expects the recovery to accelerate in the second half of the year, but he warns it will be an “uneven” recovery.

“It’s going to be fraught with uncertainty ... over mutations (in the coronavirus) and uneven distribution of the vaccines around the world.”

“The issue will be if the fiscal support continues well beyond this year - the impacts that might have on things like inflation, or asset valuations. But I think right now we’re comfortable that the valuations in the market, which are strong, reflect the recovery certainly in the third and fourth quarter of this year in the United States, really led globally, of course, by China.”

Analysts seem to be divided on whether stocks are overvalued or valuations are fair given the unprecedented stimulus amid the pandemic.

“Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior, I believe this event will be recorded as one of the great bubbles of financial history, right along with the South Sea bubble, 1929, and 2000,” Jeremy Grantham, an investment strategist and co-founder of GMO, said in a note earlier in January.

On the opposite, Mark Haefele, chief investment officer at UBS Global Wealth Management, said that outlook remains “positive”.

“After strong earnings surprises over the past two quarters, including third-quarter earnings in the U.S. being 40% higher than in the prior quarter, the outlook for corporate earnings in 2021 is also encouraging,” he said in a note.

Global shares rose to just shy of records highs on Monday as a new trading week kicks off.

You May Also Be Interested In

• JPMorgan raises S&P 500 target to 7,800, says earnings revision ’unprecedented’
• AmerX Starts Ideal Power (IPWR) at Hold
• Trump on Iran: we're trying to work out a deal that's fair