In an interview with CNBC, Chanos & Co. founder Jim Chanos says the current bear market is doing something he’s never seen before in his career: trading “above nine times to fourteen times the previous peak earnings.” He warned that the market wouldn’t be able to handle continued interest rate hikes and declining corporate profits.
While stocks are still less expensive than they were 18 months ago, they’re still “not cheap,” Chanos told CNBC’s “Fast Money.” And yet, the market is pricing in “a pretty nice Goldilocks scenario,” driving up the S&P 500 5% so far this year. The media, tech and airlines sectors are among those seeing the biggest gains. Meanwhile, investors are anticipating that corporate profits will increase 12% in 2023, that the Fed will begin to slash rates again by the summer, and inflation will deflate back down to the central bank’s 2% target. But Chanos has doubts that this is how 2023 will play out. “If you think earnings are peaking now at $200, that’s a long way down,” he said. “We are not anywhere near that.”