Consensus is growing among investors that most major asset classes around the world are overvalued, according to a survey by the CFA Society of the UK.
Four in five investors questioned said government bonds were overvalued, while three quarters said corporate bonds were also too pricey.
“Investment professionals see the search for returns as becoming even more challenging.” —Will Goodhart, CFA UKDeveloped market equities were also deemed too expensive by more than half of respondents. Only emerging market equities were deemed cheap by a majority—43% said this asset class was undervalued. However, the consensus on emerging markets was less strong than a year ago, the CFA said.
Will Goodhart, chief executive of CFA UK, said quantitative easing programmes in the US, the UK, Japan, and Europe were pushing up valuations, but the future benefits of such stimulus packages “may be limited.”
“The overall picture suggests that investment professionals see the search for returns as becoming even more challenging,” Goodhart said. “For pension funds and insurance companies—constrained by regulatory, actuarial, and accounting requirements, and required to hold these assets—the prospect of a long period of low returns will be a concern.”
A recent survey of asset managers by Bank of America Merrill Lynch found that appetite for US equities had fallen to its lowest point since before the financial crisis due to record valuations and an expensive dollar.
The S&P 500 has posted record high closing levels several times in the past 12 months, while last week the FTSE 100 hit 7,000 for the first time in its history.
Meanwhile a number of government bonds are registering negative yields on maturities up to—and in some cases beyond—five years, including Germany, Switzerland, and Denmark.
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