46 Percent Of Investors Believe Stock Market Is Overvalued

August 14, 2017 Investments

Professional investors see the stock market as being “higher than it should be.” According to the latest Bank of America Merrill Lynch Fund Manager Survey, 46 percent of respondents believe that stocks are overvalued. The turn in fund manager sentiment comes amid a bevy of warnings from big market names that there’s danger ahead.

Even with Corporate America coming off a strongly positive earnings season, investors are lowering their expectations for corporate earnings. 33 percent of those who responded to the survey believe profits will improve over the next 12 months. This figure is down 25 percent in 2017 and has reached the lowest level since November of 2015.

Investors’ expectations of corporate profits have taken an ominous turn this year, which is 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. – Michael Hartnett, Chief Investment Strategist at BofAML

Despite warnings, the market has paid little heed to the doom and gloom outlook of analysts like Ray Dalio and Jeff Gundlach. The S&P 500 is up 10.1 percent for the year, the Dow is hovering around 22,000, and the Nasdaq tech barometer has surged 17.8 percent so far in 2017. Nevertheless, BofAML’s own strategists believe “the market has exhausted its gains for the year.”

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