Is big tech still driving the market? Liz Ann Sonders weighs in

Charles Schwab Chief Investment Strategist Liz Ann Sonders joins Yahoo Finance Executive Editor Brian Sozzi to discuss the tech sector and the state of the economy.

so many stocks are trading below key moving averages. They are 10, 15, 20% off the highs. And yet everybody keeps piling into these 10 tech stocks.

Well, there might be some mean reversion here and and that's the interesting thing about the equity market right now is for investors that want some diversification away from the concentrated AI related mega cap space, you can actually find some of that diversification within the equity market. It doesn't require that you exit the equity market and either look at something in fixed income or even international. Um we still believe in international diversification, but um there are opportunities now in this process of rotation within an index like the S&P 500 and certainly down the cap spectrum. I mean, then the the profitable stocks in the Russell 2000 as for instance, are outperforming the S&P on a year-to-date basis. So as long as you stay up in quality, I think you have a pretty wide birth in terms of where opportunities lie.

I had a lot of takeaways from uh JP Morgan earnings today Lizanne, but the one thing that Jamie Diamond called out, and he's he's called this out before, but I think right now it's important that he called it out. elevated asset prices. Is the stock market overvalued at current levels?

Um it depends on what metric. I I think equity risk premiums are fairly low. That's not terribly supportive. That said, standard valuation metric like forward PE for the overall S&P has come down from 23 to about 19 over the past year. Now, all else equal, the rising yield environment should keep pressure down on multiples, but we'd be in a different situation if we were a year ago and we were trading at 23 times uh forward earnings. I I think the real key is understanding when the inflection point in earnings growth is going to occur. It may not be this quarter, but we have to have that on our radar because of such not just lofty sell-side consensus expectations, but I think increasingly what the market is keing off of are those more elevated buy-side unpublished expectations. and that's where the bar may have gotten set a bit too high.

Yeah, those whisper numbers. they're always out there. they're hard to find but they certainly exist.