JPMorgan Issues Warning on ‘Expensive’ US Stock Market – Top Exec Says Valuations Suggest Lowering Expectations on Returns

A top executive at banking giant JPMorgan Chase is issuing a warning, saying that pricey stocks mean that investors should lower their expectations on returns.

In a new interview on CNBC Television, Gabriella Santos – chief market strategist at JPMorgan’s asset management branch – says that while she’s not necessarily bearish on stocks, traders should moderate their expectations when it comes to future returns.

“It’s not to be bearish on equities because you hit a certain level of valuations. [It] tell us nothing about the next six months, 12 months. But it does tell us a lot about expected returns over the next five, ten years.

And we’ve now reached a point where multiples are at 23 times. They’re more expensive than we started the year, which is some of the highest levels we’ve seen in 20 years. So that should moderate your expected return…

When valuations get so extended, there is room for disappointment. And as a result, is there a way to take chips off the table just at the margin, if there’s a little bit too much exposure to equities at this point – too much ‘let it ride’ over the last few years. There’s a way to hedge your downside on a predictive basis with options, for example.”

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