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There’s still too little visibility from a policy perspective for investors to plant their feet in one direction or the other as stock valuations sit at record highs, according to BNY head of market strategy Robert Savage . Savage noted that picking between sticking with sky-high valuations and looking for value in an expensive market isn’t a black and white decision. The S & P 500 currently trades at a forward price-to-earnings ratio of about 22 times, near the top of its historical average over the past 20 years, when it’s averaged about a 16 times multiple, according to FactSet data. Megacap technology stocks are responsible for the majority of the S & P 500’s rise in 2025, and much of its earnings growth in the second quarter. Some of the headwinds hanging over the market, he said, are how the Federal Reserve will handle short-term interest rates in September and President Donald Trump’s tariffs. “The idea of concentration risk of only a handful of stocks [that] are making all of the money and seeing all of the flow is not unique — we’ve seen this movie before,” Savage told CNBC Pro in an interview. “It usually gets taken out in a rotation trade. Are we due for a rotation trade? Sure, but it needs a catalyst, and that catalyst usually comes from the cycle changing.” “It’s really easy for us to pontificate on potential great story policies, but they’re [only] narratives and the current environment is impeding clear investment goals,” he added. With the market setting itself up for a pullback of maybe 5% in the near-term, Savage said he prefers commodities as opposed to equities. When looking for equities, he said he largely favors companies offering high cash flow. The concern, Savage said, is that there’s little sign that the current makeup of the market is headed for a cycle change. For that to happen, there needs to be more clarity as to how the Federal Reserve will handle short-term interest rates, as well as how Trump’s tariffs will affect the economy. For example, Savage said that the economy likely won’t feel the full effects of the tariffs until October or November, two or three months from now. “It’s really hard for anyone to argue with me about growth or value when return on investment is a fundamental part of the math equation,” Savage said. “So even if the Fed does cut 50 basis points [half a percentage point], as everyone expects, it might not be sufficient to make that equation work.” “Welcome to my world of uncertainty,” he added.
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