U.S. stock market may adjust further: JPMorgan “Big Tech valuations still overvalued”

[Business Post] According to a recent forecast by JP Morgan, the U.S. stock market, which has been showing a sluggish trend, may face further adjustments. This is due to the fact that the price-earnings ratios of major tech companies are somewhat overvalued, and a number of listed companies are struggling to secure profitability. JP Morgan’s analysis suggests that it is not a good time to buy, as the stock prices of the top companies in the U.S. market capitalization are considered overvalued. The New York Stock Exchange (NYSE). Bloomberg quoted a JP Morgan report on the 1st, stating, “The U.S. stock market is showing a downward trend as the third quarter earnings season begins,” and “It is time for investors to consider buying value stocks.” JP Morgan reported that the average price-earnings ratio of S&P 500 listed companies is nearing the historical average, but the value of major tech companies is still considered overvalued. The overall average price-earnings ratio of S&P 500 listed companies is about 20 times, significantly exceeding the historical average of 16 times. However, excluding the top 10 companies in market capitalization, mainly composed of big tech companies, the average price-earnings ratio is 15.6 times, which is somewhat undervalued. JP Morgan suggested that the price-earnings ratio of the top 10 companies averages 26 times, recommending that investors should build their investment portfolios around undervalued value stocks. It was suggested that if they buy stocks mainly in energy and finance, they can expect investment performance due to inflation mitigation. JP Morgan suggested that “the difference between the average price-earnings ratio of the top market capitalization companies and all listed companies is becoming excessively large,” indicating the possibility that the stock market may face further adjustments centered on big tech companies. It was followed by an analysis that it could be somewhat risky for investors to buy small and medium-sized stocks included in the Russell 2000 index. The Russell 2000 includes companies ranked 1001 to 3000 in terms of market capitalization among U.S. listed companies. JP Morgan advised, “About half of the companies in the Russell 2000 are still struggling to secure profitability,” and “Investments should be considered after some market uncertainty has been alleviated.”