There are four reasons why a stock might have peaked

There are four reasons why a stock might have peaked

Stocks are near all-time highs and the US economy is picking up momentum. It’s as good as it gets on Wall Street.

Amanda Agati, chief investment officer at PNC Financial Services Group, says signs point to “maximum growth” right now.

“We see it in a number of economic indicators that we continue to monitor,” Agati told CNBC’s “Trading Nation” Friday.

She gives four reasons. First, inflation – producer prices rose 8.3% year-on-year in August, a record annual increase. Agati says this burning momentum will prove to be temporary, but the price hike is here to stay.

Agati also highlights economic data such as GDP growth and manufacturing figures which may be less revised; sentiment indicators such as the University of Michigan consumer sentiment index that has not returned to pre-pandemic levels; and earnings growth projections which can also be reassessed.

“When we look at all of these elements together, they all converge around the same theme, going through the peak or near the peak or in the case of evolution,” Agati said.

This does not mean that there is no reason to panic or that it is necessary to significantly change the way investors allocate funds, she says.

“It’s really more of a ‘slow your roll’ environment than we’ve been in terms of a market rally since the pandemic bottom last year,” she said. “It’s too high to restore investor expectations as to what might be the way forward.”

Since reaching pandemic lows in March 2020, the S&P 500 has gained 104%. This is less than 2% of the record set earlier this month. The benchmark index is also trading at 21x futures earnings, rebounding from the 13x futures multiple seen 18 months ago.

“It’s really about being realistic about how far and how fast the market has moved and how global the extended valuation really is, leaving some wiggle room here in the short term for the market to maintain. this path above. has been, ”she said.

Investors should also be on the lookout for potential “textbook fixes” where stocks fall by at least 10%, he says, which would be “a healthy natural functioning and behavior of the market.”

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