Equities and bonds “overpriced”

The perception among investment professionals that equities and bonds are overpriced increased in the second quarter, reaching its highest level in four years.

Members of the CFA Society UK, who were described as feeling “pretty anxious” about markets, felt that unprecedented low yields for government bonds increased the level of overpricing in this asset class, while perceptions that developed market equities were overpriced reached the highest point in four years, climbing from 40% to 62% of members polled.

CFA UK said uncertainty pervading developed markets in light of the UK’s vote to leave the EU and the expectation of a bitterly contested US presidential election were behind the sentiment.

However, the effect was more muted in emerging market equities where there was just a 3% rise – to 22% – in those surveyed who viewed these assets as overvalued.

Corporate bonds, an asset class of growing popularity, were still viewed by 69% of those polled as being overpriced – 11% up from Q1.

“Our survey respondents are clearly feeling pretty anxious. It’s hard to blame them. Political risks have come to the fore and the economic outlook is uncertain,” said Will Goodhart, chief executive of CFA UK.

CFA UK polled 360 analysts and investors to compile its valuation index.

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