The S&P 500 'is not stretched': Asset manager

Time for bulls to shine?

Despite hefty valuations weighing on U.S. stocks ahead of the earnings season, one asset manager has told CNBC that the S&P 500 is not stretched and urged investors to enjoy an overly 'pessimistic" bull market.

The U.S. benchmark is currently trading 16.5 times forward estimates -- of its companies' earnings, according to recent data from Reuters. Forward estimates is an important metric that many analysts use to gauge the attractiveness of equity indexes, however, the S&P's is about 10 percent more expensive than its historic average of 15, according Reuters estimates.

In the meantime, the S&P 500 has risen 2.5 percent so far in 2015, but has rallied by over 210 percent since the depths of the global financial crisis in March 2009. By comparison, the index jumped 29.6 percent on the back of the extra liquidity being pumped into the economy by the U.S. Federal Reserve.

Nonetheless some analysts feel the index still has some ways to go.

"That's not stretched," Michael Kelly, the global head of asset allocation at PineBridge Investments in New York, told CNBC Wednesday.

Traders work on the floor of the New York Stock Exchange.
Getty Images

He admitted that he is less enthusiastic on the U.S. index than he has been in the past, but said he was generally bullish on stocks with central banks still "subsidizing (investors) to take a little bit more risk."

"People are reluctant bulls in the market because they feel they have to be, but they don't embrace things well. This is very, very different from something like the 80s or 90s where people were perpetually positive. We think this actually makes things more sustainable," he said.

"One of the things that leads to a long cycle is not letting expectations get out of hand, not letting inventories build too much."

Ewen Cameron Watt, chief investment strategist at BlackRock, told CNBC Wednesday that there is no reason why the U.S. index couldn't push higher but stressed that accommodative central banks will mean that investors have "borrowed a bit of return from the future."

"It's been driven heavily by monetary policy," he said, before warning that an end to this stimulus - and thus better economic data - could spell trouble for the asset class.

"In a sense, good economic news could increasingly become bad stock market news and vice versa," he said.