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Anthony Scaramucci says 'stock market is narrow market'

Former White House Communications Director and managing partner of SkyBridge Capital Anthony Scaramucci discusses where he thinks the stock market is heading given the uncertainty caused by the coronavirus pandemic.

Video Transcript

ANTHONY SCARAMUCCI: But the stock market is a very narrow market. It's basically 15 stocks. Today, obviously, the tech stocks were slightly weaker. There was a small rotation. But these rotations, Andy, they never last.

And so what's powering the market right now, 15 stocks, some are trading in infinite P/E. Some are trading at 150 times earnings. And you know I'm long enough in the tooth now, 32 years in the industry, to know that this ends in tears. No one's going to be able to predict when it ends. But when a pin goes into this stuff, there'll be 50%, 60% declines. You can't have 50 times-- I'm sorry, 150 times earnings and not see some kind of diminution in value as things, multiples contract.

ANDY SERWER: Yeah, I mean, why do you think that's going to happen, though, Anthony? I mean, is it because the economy is not in great shape or COVID's worse than people think? Why do you suspect the market's gonna go down from here?

ANTHONY SCARAMUCCI: No, no, I'm not saying it's going to go down. It's going to rotate. Take a look at where the S&P was in January and the complexity of the S&P. Value has shifted into the FANG stocks plus Microsoft. The S&P now is up for the year. But value has come out of 485 stocks in the S&P and gravitated to 15.

And so what I predict will happen is as the economy starts to improve and people feel more comfortable with earnings at Carnival and earnings that other companies in the Dow Jones industrials and in the S&P 500, it'll rotate. And if you're at a 150 multiple, even if you have really good fundamentals, you can't expect those names to stay there.

And I'll bring you back to March of 2000 when the NASDAQ was at 5,000 and everybody was red hot for internet stocks. Yahoo was a hot ticket back then, as you will recall. And yet by March of 2000, a pin went into the NASDAQ, and we saw a 50% loss in value. Microsoft has traded down in my memory at least three times since its IPO. Somebody told me today it was six times. I have to do the research on it.

But my point is, you can't have stocks rally to this extent at those valuations without expecting some loss. So no, I like the overall market. There's a water wall of liquidity in the market. And the economy will improve once we get to a vaccine but I'm just worried about that sliver of stocks that's propelling the market right now.

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