LONDON – The chief executive of Standard Chartered on Thursday warned that stock market valuations have reached volatile levels amid a period of what he described as “speculative hype,” warning that it is capable of selling tech-led sales. into another. departments.
“There are signs that the wider stock market is frothy, regardless of whether the various valuations (those) would indicate that the markets are definitely (in some respects) going to be high,” he said. Bill Winters, CEO of Standard Chartered, told CNBC “Squawk Box Europe” on Thursday.
“That doesn’t apply to banks, I’ll add quickly. I’d say value stocks don’t usually look like they’re getting great value right now. But that’s the nature of the speculative hype that is us right now, “he added.
His comments come after U.S. futures contracts linked to the Dow Jones industrial average closed at the highest level Wednesday, and as Federal Reserve Chairman Jerome Powell reduced the risk of inflation.
Powell said it may take more than three years for prices to reach U.S. central bank inflation targets. It was another sign that the Fed expects to look beyond any short-term lump in inflation and that interest rates are likely to be stable for some time to come.
Fear of inflation has risen in recent weeks amid a sharp rise in bond yields as policymakers debate another round of economic relief in the wake of the ongoing coronavirus crisis.
Winters, however, said it was not concerned about inflation in the short term. The StanChart CEO said the combination of a “very appropriate” monetary policy and “very large” fiscal stimulus, particularly in the U.S., could lead to a temporary rise in inflation.
“But to turn that into real market volatility it may take a little more exogenous panic,” he said.
Tech is concerned
When asked if high-tech stocks could impact broader markets if they suddenly turned lower, Winters replied: “It’s possible. We all remember dotcom bubbles well and when the bubble wakes up, it really hit the tech department, the dotcoms, very hard. “
“But it poured into the wider economy and some would say that it even – with the benefit of hindsight – caused a fairly modest recession, even though it was feeling very hungry at the time, “he continued.
“I think there is still a very active debate about what the value is for some of these technical stocks or technical giants. When we look at the lead to the dotcom bubble and the number of companies that felt bubblish in the past on market values exceeding $ 1 trillion, who says they weren’t getting too much value at the top of the dotcom bubble and not the other way around? ” Winters said.
Earlier on Thursday, StanChart reported a 57% drop in annual profit for 2020, losing analyst expectations.
The London-based lender said pretax profit came in at $ 1.61 billion, compared to $ 3.71 billion in 2019 and an average of $ 1.85 billion of analysis forecasts compiled by the bank.
StanChart also redistributed its share and reaffirmed its long-term profit goals.