Stocks are nowhere near dot-com bubble levels and earnings justify current valuations, Deutsche Bank's US stock chief says

• Stock valuations are not near dot-com bubble era levels, said Deutsche Bank's chief US equity strategist.
• In a Tuesday webinar Binky Chadha said valuations are supported by strong earnings.
• He also reiterated his view that the S&P 500 is due for a 10% pullback as economic growth peaks.

Stock valuations today are nowhere near levels seen in the late 1990s dot-com era, said Deutsche Bank's Binky Chadha.

In a Tuesday webinar, the bank's chief US equity strategist said that stock valuations are "unambiguously high" on multiple metrics, but levels seem justified given where we are in the recovery cycle.

Chadha said his clients ask whether equities are in a bubble almost "every day." Investor fears that the stock market is in bubble have grown as the S&P 500 continues to make new records, though many strategists have tried to quell those concerns.

Goldman Sachs recently conducted a study that looked back at over 300 years of market data and concluded that while some characteristics of a stock market bubble are indeed present, a full-fledged bubble has not yet formed, and high stock prices are justified by historically low interest rates.

According to Chadha, equity valuations are always high at this point in a recovery cycle, and earnings have been very strong. During the dot-com era, measurements of overvaluation were much higher relative to now, and the overvaluation occurred much later in the cycle.

He also explained that valuations are high, not because of over exuberance but because of the involvement of retail investors during the pandemic. But as the COVID-19 crisis begins to wind down, that level of retail participation should also come down.

The strategist reiterated his viewpoint that the S&P 500 is likely to pull back up to 10% in the near-term as economic growth peaks.