Davos WEF
Davos WEF

Valuations are 'strong': What Pimco's John Studzinski thinks of markets right now

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Key Points
  • Market valuations are "strong" but reflect an expectation of an economic recovery to come in the second half of 2021, Studzinski said.
  • Recovery expected in third and fourth quarter.
Traders on the floor of the New York Stock Exchange.
Source: New York Stock Exchange.

LONDON — Market valuations are strong but we're "comfortable" with them, John Studzinski, vice chairman of asset management firm Pimco told CNBC, as they reflect expectations for an economic recovery in the second half the year.

"There's no question the current market reflects what people feel is going to be a reasonable amount of fiscal and monetary purchasing program support," Studzinski told CNBC's "Squawk Box Europe" Monday.

"The issue will be if the fiscal support continues well beyond this year — the impacts that might have on things like inflation, or asset valuations. But I think right now we're comfortable that the valuations in the market, which are strong, reflect the recovery certainly in the third and fourth quarter of this year in the United States, really led globally, of course, by China."

There have been some concerns that stock market valuations are currently too high, over-inflated by ongoing fiscal and monetary stimulus measures. Governments and central banks have been desperate to mitigate the impact of the coronavirus pandemic, which has disrupted global trade and shut down businesses for extended periods of time.

However, others believe that the market rallies reflect optimism that the global economy will soon recover once restrictive measures are lifted and the pandemic is brought under control, particularly as coronavirus vaccines are rolled out.

U.S. stocks finished mixed on Friday, although all three posted a gain for the week. The Dow registered its fifth positive week in six, while the S&P posted its third positive week in four. The Nasdaq advanced 4.19% last week for its best week since November as shares of Big Tech names pushed the index to a new all-time high.

Nonetheless there has been a surge in coronavirus cases in recent months. This was partly expected, due to the winter season, but has also been attributed to more virulent strains of the virus that have emerged in the U.K. and Europe, South America and South Africa.

Despite highlighting expectations of a recovery later this year, Studzinski did concede that "it's going to be an uneven recovery, it's going to be fraught with uncertainty ... over mutations (in the coronavirus) and uneven distribution of the vaccines around the world."

VIDEO3:3503:35
There will be more multilateralism in 2021, says Pimco's Studzinski

His comments come as the World Economic Forum kicks off this week. The annual event usually takes place in the Alpine town of Davos in Switzerland, bringing together political leaders and heads of business with the aim of discussing global challenges, and trying to find solutions. This year, however, the event has gone virtual. In 2021, a key theme of the forum is rebuilding the global economy on a fairer footing.

Studzinski said there had so far been a lack of global cooperation in tackling the pandemic, but that there could be a renewal in multilateralism under U.S. President Joe Biden.

- CNBC's Pippa Stevens contributed reporting to this story.