BoA Survey: Stock Market Overvalued

BoA Survey: Stock Market Overvalued

over 3 years ago2 mins

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According to Bank of America’s (BoA’s) latest investor survey, too much money has been thrown at stocks, and they’ve actually – whisper it – become a bit of a rip-off 🤫

What does this mean?

BoA surveys professional investors every month to see what they’re up to. And in June, the bank duly asked 190 investment managers – who collectively look after $560 billion worth of assets – how they’re feeling about the markets. Almost 80% of those surveyed – the biggest proportion ever – said they reckon the stock market’s currently “overvalued”. In other words, the investors think share prices are too high given expectations for company earnings.

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Over half the investors also said they think the current stock market rally – which has seen global stock markets rise over 30% from their March lows – is a “bear market rally”. That’s where stocks rise in the short-term before collapsing back into bear market territory and plumbing new lows 🐻

Why should I care?

It was just this week that Morgan Stanley backed a “V-shaped” economic recovery, but less than 20% of surveyed investors agree. Almost two-thirds reckon any recovery will be more gradual, suggesting a U or W shape. And that’s reflected in their stock choices over the last month: they reduced their holdings of tech and pharma stocks – some of which have benefited from the pandemic – and added “early cyclical” sectors like materials and energy 📊

The investors said they’d put more money into markets over the last month, reducing the amount of cash they had by 5% – the biggest monthly drop in over a decade. Among those who spent the most were pension funds, which consistently have to pay retirees at the expense of their cash pile 💵 They can’t necessarily afford to miss out on a rising stock market if they want to keep payments flowing – no matter how risky the market might be.

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