- The record high of the Nasdaq is "not a healthy situation" as investors accumulate in a sector of the market that is "extremely overvalued", a Wall Street strategist told CNBC in an interview on Tuesday.
- A small group of dominant technology stocks is the only one that can survive in this extreme valuation environment, said Tim Hayes, chief investment strategist at Ned Davis Research.
- He said while the Nasdaq peaked at new highs, other market indices around the world showed no signs of "broad progress" as less than half their 50-day or 200-day moving averages.
- You can find more stories on the Business Insider homepage.
The Nasdaq's seemingly unstoppable momentum, which has increased more than 60% since March, is "not a healthy situation," said Tim Hayes, chief investment strategist at Ned Davis Research in one CNBC Interview.
"The markets are extremely overvalued again," said Hayes, adding that stocks are "prone to another setback" in the coming months.
A small group of dominant technology stocks is the only one that can 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 indexes and brought the Nasdaq to a record high during the day on Monday. Apple, Alphabet, and Amazon were all higher on Monday, and Microsoft jumped after confirming reports that talks about buying TikTok were in progress.
He said while the Nasdaq peaked at new highs, other market indices around the world showed no signs of "broad progress" as less than half their 50-day or 200-day moving averages.
Ned Davis Research has referred to the market as a "secular bull market" since 2009, but Hayes said there have been doubts in recent years whether it is still intact.
"What drives it is this reflation issue, which is fueled by huge liquidity," he said while questioning the effects of stimulus measures.
"We have had negative annualized returns since January 2018, which is symptomatic of a secular bear market rather than a secular bull market."
At the beginning of 2019, the Wall Street company became optimistic about gold and bonds as both were supported by the same underlying factors of economic weakness that drove interest rates down in the long run.
Another reason for an optimistic assessment of gold is the "fairly decisive downward trend" of the US dollar, which supports the use of the precious metal as a currency alternative and store of value.
Hayes said his research firm is suggesting an asset allocation of 55% stocks and 45% bonds.
Ned Davis Research recommends a market weighting of stocks, an overweighting of bonds and an underweighting of cash.
(tagsToTranslate) markets (t) Wall Street (t) NASDAQ (t) tech (t) tech stocks (t) gold (t) stocks (t) economy