“ ‘The stock market has already discounted a significant degree of the economic recovery. So, incrementally improving data here might not do much to lift prices. The risk-reward isn’t great here.’ ”
That’s Bryn Mawr Trust’s Jeffrey Mills, who oversees $16 billion in assets, talking to CNBC Friday about what’s next for a stock market struggling for direction to start the week. At last check, futures for the Dow Jones Industrial Average YM00, +0.40% had bounced off a triple-digit drop to push higher.
“The liquidity injection that the Fed is introducing to the market is actually being tapered off,” Mills went on to say. “Stocks are discounting an environment that is not necessarily reflective of not only economic fundamentals, but earnings fundamentals.”
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Mills said that using trailing price-to-earnings as a measure, valuations haven’t been this high since the tech bubble. In this climate, Mills went to underweight in stocks mid-April.
“You have information that’s all over the map. Sentiment data isn’t really clear. One day you get a positive virus headline. The next day you get a negative one,” Mills said, explaining that investors need not get too bearish or too bullish. “Positioning needs to be somewhat nuanced.”
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Last month, Mills spoke of the benefits of having cash on the sidelines in this climate.
“When people ask me, ‘How should I be invested? I need this money in one or even two years’ time.′ I tell them they probably shouldn’t even be in the stock market at all,” Mills told CNBC, adding that the advice applies now more than ever.
The major market indexes in the U.S. are coming off four weekly gains out of five, with the Dow Jones Industrial Average DJIA, -0.80% and S&P 500 SPX, -0.56% both up more than 1% last week. The tech-heavy Nasdaq Composite COMP, +0.03% added more than 3%.