Are Shares too Expensive?

According to a survey by Bank of America, the investment professionals at banks, pension funds and insurance companies consider equities to be more overvalued than at any time since 1998. Although the Covid 19 crisis has hit companies hard, share prices are climbing higher and higher. It can be observed that more asset managers than ever before now see shares as overvalued and that they are far more expensive. Despite this, equities still seem to have no alternative. Moreover, according to the survey, fund managers are currently far more invested in the market than they were in May. The share of cash in the portfolios has declined significantly from an average of 5.7 percent in the previous month to 4.7 percent. This represents the sharpest decline in more than a decade.

According to the April survey, 93 percent of fund professionals still expected a pronounced recession. In contrast, only 46 percent of respondents in the June survey still held this view. Two-thirds of the respondents expect a “U”- or “W”-shaped economic development. This could lead to a prolonged trough.

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