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Are Growth Stocks Too Expensive?

  • With Fed tapering its QE and preparing to hike rates up to four times this year, investors have been concerned that momentum on equities could start to fade in the medium, especially growth stocks.
  • We recently saw that while US equities have been constantly reaching new all-time highs in the past year, the dispersion between stocks’ performance has been rising.
  • 40% of Nasdaq companies are now down over 50% in the past twelve months.
  • The selling pressure on growth stocks (which are usually sensitive to liquidity forces) could continue to rise in the coming month as liquidity dries up.
  • This chart shows that the explosion of Nasdaq companies’ PE ratio since the start of the pandemic coincides strongly with the surge in Fed assets.

Source: Bloomberg/MNI

MNI London Bureau | +44 203-865-3850 |
MNI London Bureau | +44 203-865-3850 |

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