In a survey, 98 per cent of investors say they believe markets are “overvalued” after world stocks bounced back from March lows at a record pace driven by government stimulus measures.Reuters
A whopping 98 per cent of investors surveyed by Bank of America believe markets are “overvalued” after world stocks bounced back from March lows at a record pace driven by government stimulus measures.
World stocks surged 38 per cent from March’s multiyear lows, fuelled by trillions of dollars in stimulus and gradual lifting of novel coronavirus lockdowns.
The euphoria led to investor cash levels dropping to 4.7 per cent in June from 5.7 per cent last month, the biggest monthly drop since August, 2009, BofA’s survey of 212 fund managers with US$598-billion in assets under management showed.
The drawdown was also partly supported by easing worries about a longer economic hit – a net 46 per cent of participants in the survey expected a prolonged recession compared with 93 per cent in April.
BofA, however, said the recent optimism in markets was “fragile” as investors still see a second wave of COVID-19 infections as the “biggest tail risk."
Indeed, stocks and oil briefly came under pressure on Monday after several districts of Beijing closed schools and ordered people to be tested after an unexpected rise in infections.
But those fears haven’t stopped investors from joining the rally. The survey showed hedge fund net equity exposure jumping to 52 per cent from 34 per cent, the highest since September, 2018.
A recent rally in value stocks, firms whose fundamental worth is not reflected in their share price, was driven by investors “violently” covering tactical short positions, BofA said.
U.S. tech and growth stocks remained the “most crowded trade” for a second straight month.
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