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Stocks are not overvalued and investors should buy the dips: Jefferies' David Zervos

U.S. markets have had a rocky April and some strategists are predicting another 5% to 10% correction. David Zervos, chief market strategist at Jefferies, says stocks are not overvalued and investors should buy the dips.

“A lot of the valuation metrics that are typical of the stock market…they fail to take into account the extraordinary monetary policy that’s been put into place,” he explains in an interview at the Milken Institute Global Conference.

Related: Shiller: CAPE ratio is high but you should still own stocks

Zervos calls quantitative easing the "greatest monetary policy experiment in history" and thinks that the Fed is still telling investors to “go take some risk!”

Zervos isn’t too worried about tapering either. He thinks it’s a baton being handed off from easy policy to the actual creation of growth.

"We’ve done a lot of healing" since the financial crisis, he notes. "We have a lot of risk-taking in the pipeline and a lot of that risk-taking is going to start to generate real returns.”

Related: Fed hawks are 'out of sync with the data': Jared Bernstein

The only thing that could go wrong, according to Zervos, is if the Fed pulls away too quickly as it did last year during the “Taper Tantrum.”

The Fed will end its two-day meeting today; forecasters are expecting its main policy-rate target to remain unchanged. As for the new Fed chair, Zervos gave Janet Yellen a C- grade on her first press conference, but says “Ben [Bernanke] didn’t communicate well in the beginning when he first started at this, and it’s hard to communicate with the market." It’s a learning process, says Zervos, and he feels that Yellen will continue to carry Bernanke’s dove-ish baton.

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