Veteran strategist Ed Yardeni says US stocks are overvalued, and hints investors should 'go global' to find buying opportunities
- Veteran strategist Ed Yardeni, who is usually known for his bullish predictions, thinks US stocks are overvalued right now, citing rising tensions with China, and spiking coronavirus cases.
- He told CNBC: "We've had a melt-up and that's very visible in valuation multiples. Stocks are not cheap."
- "Valuation is certainly a concern in the US. It's got me thinking whether it's time to go global during this bull market," he said.
- US-China tensions have risen in recent weeks over the future of Hong Kong, while coronavirus runs rampant across the country.
Veteran strategist Ed Yardeni, who is usually known for his bullish market predictions, has a very different message this time.
Yardeni warned that US stocks are overvalued and could face a shock if COVID-19 cases continue to surge and ripple across the US, and tensions with China accelerate.
Yardeni, who is president of Yardeni Research, told CNBC's Trading Nation Friday: "We've had a melt-up and that's very visible in valuation multiples. Stocks are not cheap."
"Valuation is certainly a concern in the US. It's got me thinking whether it's time to go global during this bull market," he said.
He added: "On top of that, we don't seem to be handling the opening up of our economy and social distancing to minimize the flare-ups of the virus as well as they're doing in some parts of Asia and Europe."
Yardeni warned of a "melt-up" in stocks as recent as earlier this month.
He said at the time: "I think the bull market is still intact, I don't view the sell-off we had in February and March as a bear market."
Yardeni was initially predicting a V-shaped recovery, but earlier this month he said he revised this to a check-mark-shaped recovery.
But now Yardeni thinks those who invested in US stocks should prepare for a sharp correction as the US cases of COVID-19 rise and investors should look globally for other opportunities.
The US surpassed its biggest single day-rise with more than 75,000 cases reported on Thursday. As recent as June 24 the record was 37,014, and the record has been broken 11 times in the last month alone.
"We're seeing major states reversing the reopenings of their economies. So, all this good news we've gotten in May and June on the economic front, including even the unemployment numbers, is vulnerable," he said.
Yardeni also noted "an increasingly and potentially dangerous conflict between the United States and China escalating again," as a threat to stocks.
US and China have been a loggerheads in months on who is to blame for the coronavirus outbreak and most recently the introduction of a new security law in May which increases China's level control over Hong Kong.
In response, the US passed the Hong Kong Autonomy Act, effectively eradicating Hong Kong's special trading status. Both the US and China have vowed to impose tit-for-tat sanctions on one another, marking a new low in trade tensions between both countries.