CFA Society of the U.K. members think developed markets equities are overvalued, with the highest number of respondents viewing the asset class as overpriced in the history of its valuations index.
The index, which polls the society's members, found 62% of respondents view developed markets equities as overpriced in the second quarter, up from 40% in the previous quarter. That is the highest level in the four-and-a-half year history of the index, which the CFA said in a statement accompanying the data reflects “the uncertainty pervading developed markets in light of the U.K.'s vote to leave the European Union and the expectation of a bitterly contested U.S. presidential election.”
Investors' flight to safe haven assets also affected the perception of government bonds, seen as overvalued by 75% of respondents, compared with 67% in the first quarter. Gold is also seen as increasingly overvalued, to its highest level since 2014 at 39%. In the first quarter, gold was seen as overvalued by 34%.
Corporate bonds were viewed as overpriced by 69% of respondents, up from 58% in the previous quarter.
Emerging market equities are overvalued in the eyes of 22% of respondents, up 3 percentage points vs. the first quarter.
“Our survey respondents are clearly feeling pretty anxious,” said Will Goodhart, CEO of CFA U.K., in the statement. “It's hard to blame them. Political risks have come to the fore and the economic outlook is uncertain.” He cited falling bond yields and U.S. and U.K. equity market highs. “The shift back toward a perception of developed market equities being overvalued is unsurprising. The extent and speed of that shift however was somewhat unexpected.”
The CFA Society of the U.K. surveyed members July 11-29, receiving 360 responses from analysts and investors. Members are asked to rate developed and emerging market equities, government and corporate bonds, and gold, in terms of representing fair value on a one-year time horizon.