On Wednesday, March 8, 2017, David Tepper, the founder and president of Appaloosa Management, discussed his views on the equity market, the bond market, and top stock picks in an interview with CNBC. He also discussed the measures taken by various central banks such as the European Central Bank (or ECB), the Bank of Japan (or BoJ), and the Fed.
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Since the US election, various US indexes have shown tremendous gains. The rally in the market has mainly been driven by optimism about the US economy (SPY) (QQQ) and President Donald Trump’s proposed policy changes. The broader market S&P 500 Index has risen nearly 17.5% in the last one year. The index (IWM) (IVV) (VOO) crossed various technical levels such as 2,138, 2,271, and 2,395. At technical highs, a continuation in fundamentals is necessary to achieve higher asset prices. Many fund managers believe that the stronger economic fundamentals will drive market movement further.
In the present scenario, the S&P 500 Index is trading at the 2,372 level. The S&P 500 Index (SPY) is currently trading at a price-to-earnings multiple of 18.6x. David Tepper believes the market is not looking cheap in the present scenario. He thinks that the prolonged lower interest rate is a major concern for market participants.
David Tepper said, “On a multiple basis it’s kind of full … I don’t think the market’s cheap, on the other hand, with that backdrop of growth around the world, with the potential we’ll do other things here, with the sugar that’s still being put on by the ECB, BOJ and let’s face it the Fed is way low … you can’t be short in that kind of setup.”
In the next part of this series, we’ll analyze David Tepper’s view on the bond market.