Valuation concerns as investors clamour for short-term certainty

Over-valuation in tech, software and consumer staples

Investor appetite for certainty on near-term profits and strong balance sheets could be forcing some stocks to outperform “irrespective of their underlying intrinsic valuations”, portfolio managers have warned.

Technology and software firms are among the companies which are able to have a greater degree of certainty despite lockdown conditions, and investors have favoured them in the equity market recovery since mid-March. This is evident in the strong returns of the tech-heavy Nasdaq 100 index, which is up 12.8% year-to-date, according to FE fundinfo. By comparison, the S&P 100 has returned just 3.9% over the same period while the MSCI World is down by 1.6%. Managing director of strategic public equity at Gresham House Richard Staveley explained that during a typical market crisis investors...