A Wall Street strategist says the Nasdaq is 'extremely overvalued' after hitting a fresh-record high, and says that's 'not a healthy situation'

• The Nasdaq's record high is "not a healthy situation" as investors are piling into one sector of the market that is "extremely overvalued," a Wall Street strategist told CNBC in a Tuesday interview.
• A small group of dominant tech stocks are the only ones able to survive in this environment of extreme valuations, Tim Hayes, chief investment strategist at Ned Davis Research, said.
• He said that while the Nasdaq is peaking at new highs, other market indices around the world are not showing any signs of a "broad-based advance" since less than half are above their 50-day or 200-day moving averages.
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The Nasdaq's seemingly unstoppable momentum — which has seen it surge more than 60% since March — is "not a healthy situation," Tim Hayes, chief investment strategist of Ned Davis Research said in an CNBC interview.

"Markets have gotten extremely overvalued again," Hayes said, adding that stock are "vulnerable to another setback" in coming months.

A small group of dominant tech stocks are the only ones able to survive in this environment of extreme valuations, Hayes said, and if that doesn't change, stocks won't be able to maintain their multi-year bull market.

Tech mega-caps are leading benchmark indexes higher and drove the Nasdaq to a record intraday high on Monday. Apple, Alphabet, and Amazon all traded higher on Monday, and Microsoft jumped after confirming reports that it was in talks to buy TikTok.

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He said that while the Nasdaq is peaking at new highs, other market indices around the world are not showing any signs of a "broad-based advance" since less than half are above their 50-day or 200-day moving averages.

Ned Davis Research has called the market a "secular bull market" since 2009, but Hayes said doubts have emerged over the last few years over whether it is still intact.

"What's driven it is this reflation theme driven by the massive amounts of liquidity," he said, while questioning the impact of stimulus measures.

"From January 2018, we have had negative annualized returns which is more symptomatic of a secular bear market, not a secular bull market."

At the beginning of 2019, the Wall Street firm turned bullish on gold and bonds as they were both supported by the same underlying factors of economic weakness that kept interest rates in a long-term decline.

Another reason supporting a bullish view on gold, he said, is the "pretty decisive downtrend" of the US dollar which supports the precious metal's use as a currency alternative and store of value.

Hayes said that his research firm suggests an asset allocation of 55% equities and 45% bonds.

Ned Davis Research recommends being marketweight on equities, overweight on bonds, and underweight on cash.

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