Is the U.S. Stock Market Getting Too Frothy?

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June 6 (Bloomberg) -- Bespoke Investment Group's Paul Hickey and JPMorgan Funds' Andres Garcia-Amaya discuss the state of the U.S. stock market and Federal Reserve monetary policy with Alix Steel and Matt Miller on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Record high for the s&p. let's bring in a guest from j.p. morgan.

Matt and john.


Are we overvalued at this point?

Valuations are a little bit above the historical average right now but you're in a bull market and bull markets never end with attractive valuations so you tend to see multiple expansion and we've not seen anywhere near the average valuation expansion.

So for the shorter term, we have had the best week in two months and it's been a good run but every international market has all rallied.

End tamisha is on the one.

And didn't russia have a bull market today?

That's some turnaround.

217,000 job numbers.

Unemployment rate seems still.

Does the fed ever look at this anymore.

They're not doing more, in fact, probably less.

What's going on?

For them, is it worth enough to try to raise interest rates too soon?

If they're wrong and the economy doesn't improve they look really bad or do they rate for the economy to actually improve even if they have to deal with more inflation?

Four months of over 200,000. consumer credit -- almost 26 billion.

And everybody who's coming on, karl from deutsche bank i heard earlier say everything we lost in the winter of last quarter we're going to gain in a rebound here.

If we're seeing high valuations and if the fed feels like it's ok to continue pulling -- pulling back on the punch bowl even more, isn't that bad for equity investors.

A tighter fed would be bad for equity investors.

But we've seen the situation before where the fed is not going to jump the gun.

Even though ploiments has been growing, inflation numbers are pretty much subdued.

Not a hawk.

And we have to look at housing, oosk,, to on the downside.

Eric talked about this topic earlier today.

Take a listen.

Some of the recent housing data is disappointing in.

A lot of ways -- it's not terrible but it's disappointing.

You have to keep the mortgage rate down and keep housing movement.

Inflation expectations consumption hiring.

You can't truly fix structural unemployment if we can't keep housing moving.

Or they're using that as an excuse to say things are not better.

Either way, they're the fed and they're probably going to keep interest rates low.

As long as inflation is not above 2, 2. 5, i don't think they see it as a concern.

They'll probably keep rates low as long as they can.

We have the same problem in the u.k. too.

If you can't afford your mortgage you can't afford your house.

That means the house question is still there.

Why are we still focused only this?

Why is do we have to get back to 2007? i live in the u.k. right now.

And guess what, it feels a little bit like 2007. why does everyone want to get back from the same economy when everything was a mess?

We're far from 2007. we're still below the historical averages and that doesn't keep copulation -- population into account.

The point is they're trying to boost -- they're trying to bring about asset inflation, right?

Because they want some inflation to get the economy going.

The problem is they can't get it going anywhere else besides high-end housing.

That's what wage inflation will be key.

We are starting to see a trend of moving upwards.

.2%. it's slowly moving but that might be the perfect temperature.

You don't want the economy to overheat too quickly because the fed will raise interest rates.

Let's look ahead to next week.

It seems like the data point will be resale numbers on thursday.

What's the expect thation there?

I think it's going to be a slow imapproval.

A bifurcation of the high end and low end and everything else in the middle disappears?

Unfortunately that trend has continued.

You look at the spread in confidence among higher income americans vs.

Lower income americans.

The spreading confidence is wider than it's ever been.

I think you're still going to see that until you get more wage inflation for the lower paying jobs.

If you are looking at the entire world and all the markets right now -- you just looked at russia.

Where's the best place to put your money?

I think european markets are in the sweet spot.

We're putting our foot away from the accelerate here.

They're actually starting to press the accelerate.

You have a very easy monetary policy and earnings could grow double digits anytime.

Valuation a little bit more attractive than here in the united states.

You have to be selective but we see opportunities there.

Are you going to get hedged?

What are the risks entailed in that?

One way is just focusing on s&p 500 companies, a lot of houses that get anywhere review news and companies that generate more than half of their review knews outside of the u.s. are outperforming by a wide margin over the last year.

Companies more leveraged to european growth, that's a way for a u.s. investor to not ho virginia to worry about all the -- there's less to worry about.

Eric altoonis.

He was talking about if you are going to go into e.t.f.'s, there are those you can go into hedge.

You still get the composure to -- exposure to a general stock gain.

The euro, it helps their ability to be before competitive.

It almost kind of washes out.

You get a weaker euro, earnings could grow faster.

One of the most interesting points i've heard today -- mike earlier on "surveillance" mike mckee was saying -- he and you were having a conversation to be fact that everyone thinks the u.s. fed is shrieking -- shrinking its balance sheet and that the european is expanding it.

Which is actually just the opposite.

Yes, but it's a plan to ease.

Yes, they've cut rates but everything else is a plan.

We don't know what the pickup will be.

Maybe banks don't even want the money.

And the plan may just remain a plan.

Which means perhaps the fed is more important for the markets in general.

Let's be honest.

I think even if the plan becomes actually executed we don't know how much it would actually help the real economy.

Ultimately what they want is confidence.

These latest efforts are just reminding people that they might do something, which eventually might help confidence and could lead to other things in the economy.

What's your biggest -- biggest fear in the market?

There are a lot of geopolitical tensions with china we often forget about in that side of the world.

That's something we keep an eye on.

That is the one thing that no one puts attention to.

How about you?

Coming into the year, one of our worries was is the economy going to grow too much?

The winter put that to rest but we're starting to see a rebound.

If the economic data does start picking up and the fed finds themselves late to the party, that is not going to be a pretty picture.

But what are the odds?

Where would you put the olds of that?

It's small but it's something that you really need to focus on.

No, once the fed starts tightening, especially after long periods where they're on hold, there's always some sort of dislocation that happens in the market.

It seems to be a long way off

This text has been automatically generated. It may not be 100% accurate.


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