Investors are saying, “Stocks Are Too Expensive”

Investors are saying, “Stocks Are Too Expensive”

Investors are saying, “Stocks Are Too Expensive”


Caution Signals Blinking

Many professional investors (46%) saying stock markets are overvalued, Bank of America Merrill Lynch’s monthly fund manager poll showed Tuesday.

The survey, which polled 202 asset managers with $587-B under management, was carried out between 4-10 August, and showed cash levels high at 4.9%, and the allocation to equities fell to a net 36% overweight.

European investors’ cash weighting rose to 5.3%, the highest reading since March 2003.

A net 33% of investors saying corporate profits would improve over the next 12 months, down 25% from January to the lowest level since November 2015.

The bank suggested this was a warning sign for equities over bonds, high yield over investment grade and cyclical sectors over defensive ones.

“Further deterioration is likely to cause risk-off trades,” said BAML’s chief investment strategist.

Expectations for faster global growth also fell to 35% in August, down from 62% in January, and the outlook for corporate operating margins stalled.

However, the percentage of investors expecting a ‘Goldilocks’ scenario of above-trend growth and below-trend inflation rose 6% to 42%, a record high.

This could be linked to the fact that US inflation has remained subdued.

US stocks remained out of favor, with the allocation falling to a net 22% underweight, the largest underweight since January 2008. The relative US equity positioning Vs the rest of the world was also the lowest since April 2007.

The tech-heavy NAS Comp was seen as the “most crowded” trade for a 4th month running, nominated by 31% of poll respondents.

“Cash and overvaluation fears aside, fund manager survey positioning remains broadly pro-risk, pro-cyclical,” BAML said.

Some 22% of respondents said the biggest tail risk remained a policy mistake by the Fed or the ECB.

Tuesday, the major US stock market indexes finished at: DJIA +5.28 at 21998.99, NAS Comp -7.22 at 6332.99, S&P 500  -1.23 at 2464.57

Volume: Trade on the NYSE came in light at 700-M/shares exchanging hands.

  • NAS Comp +17.7% YTD
  • DJIA +11.3% YTD
  • S&P 500 +10.1% YTD
  • Russell 2000 +1.9% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.49) Very Bullish (0.53) Bullish (0.48) Bullish (0.46)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Neutral (0.17) Neutral (0.18) Bullish (0.38) Neutral (-0.04)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Bullish (0.41) Neutral (0.20) Bullish (0.48) Very Bullish (0.54)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.30) Neutral (-0.05) Bearish (-0.27) Very Bearish (-0.58)

Stay tuned…

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