JPMorgan Chase vice chairman Daniel Pinto says he sees limited upside potential for the stock market at current valuations.
Pinto tells Bloomberg that the S&P 500 index is unlikely to rise significantly higher from the current level as it is already fairly priced.
“…Markets are pricing a very very benign scenario and quite a bit more…
There may be issues or not, but the S&P at 6,700 or so 23 times [earnings] is quite healthy to say… I think that from here the upside is relatively limited.”
Pinto says the artificial intelligence (AI) technology is still in an early phase but stocks in the field and related sectors could undergo a price reversal.
“…I think that one thing to keep an eye on is how much capacity is being created, how all these companies, how much revenue they are going to get to compensate to pay for that capacity. It’s likely, I don’t know the probabilities, but it is possible there is probably a correction there.”
According to Pinto, the potential correction in AI and AI-related stocks risks triggering a broader market downturn.
“And that correction will also create a correction in the rest of the segments, in the S&P and in the industry because you are probably, in order to justify these valuations, you are considering a level of productivity that will happen, but it may not happen as fast as the market is pricing.”
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