Developed markets equities and fixed income are overvalued in the eyes of CFA Society of the U.K. members, with the society warning of a potential bond bubble.
A poll of the society's members for its valuations index showed 67% of respondents think developed markets equities were overvalued in the third quarter this year, up from 62% in the second quarter, and 40% in the first quarter, and the highest level since the index was started in 2012.
Only 10% of respondents think equities are undervalued, compared with 17% of respondents to last quarter's poll and 27% at the start of the year.
The view of global bonds as being overvalued has also increased, with 82% of those polled considering government bonds to be overpriced. That compares with 75% in the second quarter and 67% in the first quarter.
Corporate bonds are considered to be at their most overvalued in three years of the society's index, with 78% agreeing the asset class is overvalued, up from 69% in the second quarter and 58% in the first quarter.
Will Goodhart, CEO of CFA U.K., said Brexit and concerns around the U.S. election “may be weighing on the minds of investors as the proportion of our respondents viewing developed markets equities as overvalued hit record highs. Similarly, fears of a bond bubble appear to be growing.”
Mr. Goodhart added that the broad perception of valuations being at “extreme levels indicates that market values are more than usually vulnerable to rapid and significant change.”
However, emerging markets still look cheap to the society's members. On the equities side, 42% believe the asset class is undervalued, down from 50% in the previous quarter, and 57% in the first quarter. Emerging markets equities are viewed as overvalued by 24% of respondents, vs. 22% in the second quarter and 19% in the first quarter.
The CFA Society of the U.K. surveyed its members Sept. 15-30, receiving 354 responses from analysts and investors. Respondents were asked to rate markets in terms of representing fair value on a one-year time horizon.
