We had a quick chat this afternoon with Kate Warne, the investment strategist at Edward Jones in St. Louis, for thoughts on stock market valuations, the Cyprus situation and how individual investors, its primary customers, should be thinking. Here’s what she said:
On the markets: “Clearly with the Dow making record highs, stocks have done well. The stock market has caught up with some of the good news we have seen on earnings and the economy – but the question is, will we see stocks move higher or move back? There are many things that could pull the market lower, but we think the trend is likely to be higher based on the view that earnings are continuing to grow, at a slower pace, and the economy is growing.”
Are U.S. stocks overvalued?: “We don�t think so. The S&P is trading at 13.5 times forward earnings. The historical average, since 1960, is 15 times. Stocks having moved up – they are not as attractive as they were.
On Cyprus: “We are watching Cyprus closely. The risk for policy makers in Europe is too great not for them to reach some kind of agreement so the Cypriots get bailout money in some form. It looks like they will avoid taxing depositors with less than 100,000 euros, which seemed to be the biggest sticking point in the first proposal. It is anyone�s guess what the terms will be, and it probably won�t be until Sunday or Monday night, before the banks open on Tuesday, that an agreement might be reached. If the banks shut down, that would be much worse for the contagion effect in Europe.”
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