The benchmark S&P 500 index is down more than 10% for the year as inflation and the war in Ukraine continue to be the front and centre of all financial debates. Still, Research Affiliates’ Rob Arnott says the U.S. stocks look “very expensive” at present.
Arnott defends his thesis on CNBC’s ‘Squawk Box’
While there may be some opportunities in the U.S. equity market, Arnott said he’d prefer the European stocks over the U.S. stocks at this point in time. On CNBC’s “Squawk Box”, he noted:
I use the Shiller PE ratio that takes out effects of the economic cycle. It’s at around 36 times the 10-year average earnings. That’s very expensive. You could go halfway back to historic norms over the next 10 years, and you’d still be expensive and that’ll cost you 3.0% a year in repricing the stock market.
The Euronext 100 index is currently down 13% year-to-date. A day earlier, the ECB left its key rates unchanged citing uncertainty related to the Ukraine war.
Ukraine war updates: latest developments on Friday
The White House on Thursday expanded its ban on Russian products that now include alcohol, seafood, and non-industrial diamonds. President Biden also stripped Russia of its “most favoured nation” trade status. Russia’s Putin previously called the U.S. sanctions a declaration of economic war.
According to Pentagon, about 90% of Moscow’s combat power is still intact after more than two weeks of military operation. Putin’s attacks are targeting more cities of Ukraine on Friday while a huge Russian convoy inched closer to the capital (Kyiv).
The U.S. and its allies continue to refuse Ukraine’s demand for a no-fly zone. President Biden also warns that aiding Ukraine with offensive weapons could trigger the World War III. On Thursday, a highest-level meeting between Russia and Ukraine concluded with no progress on ceasefire.
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