Markets Look 'Toppish' Amid Speculative Hype, Stretched Tech Valuations Could Possibly Yield Broader Market Disruptions, Says Standard Chartered CEO
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Bill Winters, CEO of Standard Chartered, said that some aspects of financial markets look "toppish" with certain valuations, in the tech sector especially, looking unsustainable.
“There are indications that the broader stock market is frothy, whether it’s the various valuation multiples (that) would indicate that the markets are, certainly (in) some aspects, are toppish,” Winters told CNBC.
“That does not apply to banks, I will add very quickly. I would say value stocks generally don’t look like they are very fully valued right now. But that’s the nature of the speculative hype that we are in right now,” he added.
However, Winters believes that stretched valuations in the tech sector could yield broader market disruptions.
“It is possible. We all remember the dotcom bubble very well and when the bubble bursts, of course it hit the technology sector, the dotcoms, very hard. But it spilled over to the broader economy and some would say it even led to — with the benefit of hindsight — a very mild recession, even though it felt pretty acute at the time.
“I think there is still a very active debate over what the value is for some of these tech stocks or tech giants. When we look at the follow through to the dotcom bubble and the number of companies that felt bubblish at the time that have gone on to have market values in excess of $1 trillion, who’s to say that they were not grotesquely undervalued at the peak of the dotcom bubble and not the other way around?” Winters added.
He joined Fed Chair Powell in downplaying inflation concerns. He believes that we may see a temporary rise in inflation on the back of “very accommodative” monetary policy and “very substantial” fiscal stimulus.
“But for that to translate into real market volatility would probably require some other exogenous shock,” he stresses.
Winters was speaking to CNBC after his bank restored its dividend and reaffirmed its long-term profit targets. StanChart reported a pretax profit of $1.61 billion to miss on the $1.85 billion analysts forecasted.
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