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Who Says the Market is Overpriced? A Barron’s Q&A with Evercore CIO John Apruzzese

The market is at its average historic valuation, said John Apruzzese, the Chief Investment Officer of Evercore Wealth Management, in an interview with Barron’s on his study of the relationship between inflation and stock market valuations.

“Inflation is absolutely crucial for long-term investors,” said Apruzzese. “It’s the most important macro factor. Oddly, the market is stuck on the P/E ratio. It makes much more sense to think about the [real] earnings yield.” On that basis, the market is not expensive, he said.
 
“Valuation isn’t a good market-timing tool,” he added. “Markets can stay overvalued or undervalued for quite a while. But it’s a check for the long term. We are investing for the long term.”
 
He also observed that corporate tax cuts could prove disinflationary. “What will corporations do with their tax savings? The choice that is conventional is more dividends, more share buybacks, more investments, and higher wages. But if a company and all its competitors suddenly get a drop in costs, what’s a common thing that businesses do? Drop prices.”
 
The Barron’s Q&A, Who Says this Market is Overpriced?, can be accessed here for subscribers. The article addressed Apruzzese’s view of the real earnings yield and other valuation metrics, the firm’s inflation forecast, and opportunities in specific sectors and companies.
 
To view the Evercore Wealth Management white paper, A Reality Check for Stock Valuations, click here or contact us here for further information.