Market is overvalued because it’s ‘almost impossible’ to predict consumer demand
Billionaire entrepreneur Mark Cuban told CNBC on Thursday that he believes the stock market is overvalued, citing the uncertainty around consumer spending due to the coronavirus pandemic.
“I think it’s almost impossible to predict where consumer and corporate demand is going to come from,” he said on “Closing Bell.” “And because of that, it’s hard to create a valuation for businesses.”
Cuban, who owns shares of Netflix and Amazon, said there are undoubtedly stocks that benefit from the coronavirus pandemic and the newfound consumer behavior. But the “Shark Tank” investor stressed that “business has been fundamentally changed” by the public health crisis, making it difficult to value the market overall.
Cuban’s comments Thursday came just before the stock market closed, with all three major U.S. indexes finishing in the green on the day. The Dow Jones Industrial Average rose more than 375 points to finish1.6% higher, while the S&P 500 finished up 1.15%.
Stocks have been otherwise struggling this week, but the S&P 500 remains more than 30% above its most recent bottom on March 23.
Cuban is the latest high-profile investor this week to call into question the market’s valuation, joining the likes of billionaire hedge fund investor David Tepper and Stanley Druckenmiller, chairman and CEO of the Duquesne Family Office.
But Cuban has been raising questions about the market’s rally from its coronavirus-driven lows for weeks. In early April, he told CNBC was “surprised” at how stocks had recovered and was raising cash.
“I think people are naturally optimistic right now in terms of the market. I just don’t think they are really factoring in what we are going to see on the other side,” the Dallas Mavericks owner said then.
The always-outspoken Cuban has been particularly vocal during the Covid-19 pandemic, arguing that supporting workers must be a priority in government aid programs and also advocating for modifications to the small business loan program.
Cuban told CNBC earlier this week he believes the White House standard for Covid-19 must become the national standard before consumers feel comfortable going out again.
— Disclosure: CNBC owns the exclusive off-network cable rights to “Shark Tank,” on which Mark Cuban is a co-host.