A Record Number Of Market Participants Says The Market Is Overvalued, Surpassing 1999 Bubble Highs

Tyler Durden's picture

The latest monthly Fund Managers (FMS) survey from Bank of America is out, and continuing the trend noted in previous months when the number of active managers who said that stocks are overvalued hit the highest in nearly two decades, the latest version reveals that the number of respondents saying that equities are overvalued has just hit a record high, surpassing the all time high set during the 1999 bubble. As shown in the chart below, 44% of fund managers now say equities are overvalued, the highest response on record, and up from 37% in May.

Meanwhile, "excess valuation" concern coincide with high global profit expectations - just like prior to the 2000 recession - "shows that market vulnerability to profit weakness is very high" according to BofA.

Not surprisingly, 84% of investors think US is the most overvalued region, a new all-time high, while a net 18% think European equities are undervalued and a net 48% of investors think EM equities remain undervalued.

Meanwhile, even as the market rose to record highs, FMS cash "on the sidelines" rose from 4.9% to 5.0% in May according to BofA, which is well above the average cash level over the past decade of 4.5%. avg.

BofA suggest that while ominous on the surface, and in contrast to the 1999 bubble, the record June FMS views of "excess valuation" does not coincide with a fall in cash levels, which to BofA's Michael Hartnett suggests there is no irrational exuberance. Then again, this time the exuberance appears to be manifesting itself via passive investing and ETFs, as well as vol bets, so it is unclear if such comparisons are appropriate.

Asked for their opinion on internet stocks, 75% said internet stocks expensive or in bubble, with 57% of investors saying "expensive", 18% "bubble-like", 15% "fair", 1% say "cheap.

Related to this, respondents said that the #1 "crowded trade" in June is long Nasdaq, even more so than in May, jumping from 26% to 38%, while #2 is long EU equities, and #3 long US/EU corporate bonds.

The monthly evolution of the "most crowded trade" according to the market is shown below:

Asked what they see is the biggest tail rise, active managers responded "China Credit Tightening" the second month in a row, with crash in global bond markets second (18%); followed by delay in U.S. corporate tax reforms (14%)

This is how the "biggest tail risk" has evolved over time:

64% say 10-year Treasury yields of 3.5%-4.0% needed for an equity bear market

More ominously, when asked about global growth expectations, only 39% macro momentum has peaked; vs vs 62% in January, "so June FMS sees defensive rotation to staples, utilities + largest drop since Jun'10 in allocation to commodities."

And related to that, "contrarian bond bulls" are on the rise, with just 9% of FMS respondents forecast lower/flat bond yields last Dec, now 20% do. At the same time, inflation expectations have also continued to fall, to 60% from 75% in April, suggesting the global economy has indeed peaked as UBS showed yesterday.

Finally, in another notable inflection point, while those expecting a "goldilocks" outcome has risen to a new record highs at 38%, those expecting "secular stagnation" has also risen to 46%, from 41% in May, confirming just how split the outlook on the economy the market remains.

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Doom and Dust's picture

A record number of market participants, sure. Just not the largest of them.

Ghost of PartysOver's picture

If that is true then this thing has "Short queeze" written all over it.  Bonus points go to the CB's that are still buying as a backstop.

Justin Case's picture

CB's wanna make sure the pool is full before they pull the drain plug. Record earnings this year, as always.

BabaLooey's picture






NoDebt's picture

Sort of a slow news day today, huh?  I'm sitting around the office doing menial crap, all lethargic and wondering why we can't have Brexit votes every week to spice things up.


Ghost of PartysOver's picture

NoDebt, The Great DC War of 2017 is a slow motion perpetual Brexit Vote.  Another Battle in this war happens this afternoon.  If the Deep State keeps losing these skirmishes then I will start to get concerned about their "Scorched Earth" battle plans.

open calender's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

Doom and Dust's picture

Never fight the Fed.

Try the BoE.

GunnerySgtHartman's picture

It would be interesting to know how many of the fund managers who say things are overvalued are still putting money into equities.

Justin Case's picture

B/C it's other people's money they are puttin in.

Frank Underwood's picture

As long as you still have people sitting at the casino winning.
House is waiting for you to go all in. Then the plug will pulled.

Cordeezy's picture

The stock market is over valued but everyone is still buying in?  I guess we are the best choice even though we are over valued from a historical stand point.






asteroids's picture

The "market" is a handful of computers ping ponging the market upwards. Bears died off a long time ago and J Q Public is no longer a player. So, there's no one to fleece on the way down, so I don't think it'll happen. Waiting for the Matrix to reboot itself.

unplugged's picture

someone has to "place the bets"

so there will be "someone to fleece"

for every winner, there's a loser

in this case the losers are the holders of US dollars since the losses are "made up" by printing more dollars hence diluting its worth

so those getting fleeced are the bagholders of US Dollars on the day that nobody will accept their bag in exchange for something

until that day arrives that bag is a hot potato, a ticking time bomb, a bag full of hot dog shit, etc...

William Dorritt's picture



To support the Market values 100% of the non Wall Street Jobs have to be exported to Slave Labor Countries and any job that can't be exported like Janitor, Nanny, Housekeeper or lawn boy must be filled by illegals and H1b workers to drive the cost of Labor to zero.


Once the the LABOR COST target of ZERO is achieve for all non-important workers aka not Wall Street, the valuations will be based on profits growth.......


Wait.........we already did this.......which is why we elected TRUMP to undo it.......

unplugged's picture

so then, "the herd" says its overvalued

so then everyone is on the "its overvalued" bandwagon

wouldn't that make the contrarian view that its "undervalued" ?

hmmm ?

William Dorritt's picture

Pump and Dump?

Too many Dollars chasing too Few Investments.

At least 50% of the Dollars are probably leveraged.

Trump should focus on Small Business (where the jobs are), and mining and trade deals,

or repealing trade deals and stay away from cheer leading the bloated Markets, it's a mistake.

Same goes for Trump Jr, don't cheer lead Wall Street,

Ivy League and Wall Street are the problem not the solution.

Crypto-World-Order's picture

Just go 3x on the s&p nothing can go wrong, bitchez

ludwigvmises's picture

The more say its overvalued the higher it will go. The time to get nervous is when people say its undervalued like crazy.

agstacks's picture

I was typing a similar comment when I looked up and saw yours.  I think you're correct. 

actionjacksonbrownie's picture

So why didn't he circle 2008??? The crowd didn't see it coming then, because the crowd is usually wrong. Until ALL the CB's announce the money printing is stopping, and interest rates are going to rise substantially, this show WILL go on, regardless of what market participants "see".


The winning strategy for the last  6 years has been to sell Gold/Silver, and leverage into the Markets. I don't see that winning streak coming to an end any time soon.

Ban KKiller's picture

Record number of central banks buying record amounts of stocks/bonds using record amount of fiat? Got it! 

The Real Tony's picture

The Russian stock market and the Venture Exchange up in Canada are the only two markets in the world that aren't overvalued. There's no surer way to lose all your money than to put it into U.S. stocks today. We should see the crash of all crashes followed by about twice the length of the 1966 to 1982 era or 32 years of sideways action after the greatest stock market crash in history.

Liberty4Sum's picture

I agree in part with the above posts. But keep wondering, if so many are convinced the market is overvalued, when will Janet Yellen look at these surveys and invest accordingly with our money.

Liberty4Sum's picture

When the Bank of International settlements tells the CBs to sell sell sell that'll be the beginning of the end of this party.

But on the lighter side I've been reading ZH for years and this is my first post. You guys and your sarcasm have kept me entertained for all this time so I thank you all. Even the spammers and your promises of $7000 a day, thank you for your contributions.

onthedeschutes's picture

The only "market" participants that matter any more are the FED, BOE, BOJ, SNB, and other central banks.

Joe Cool's picture

The more people call a top, the higher it goes...You can't stop computer entries and pressing the return button...The Dow will go much higher...The digits may not be worth much...

Joe Cool's picture

The more people call a top, the higher it goes...You can't stop computer entries and pressing the return button...The Dow will go much higher...The digits may not be worth much...

Badself's picture

This is fake news.... The DOW is going to 50K. Do not short the market...

venturen's picture

and not one of them is a central banker..

Md4's picture

"...the latest version reveals that the number of respondents saying that equities are overvalued has just hit a record high, surpassing the all time high set during the 1999 bubble."

We all know this.

Yet, it continues...

If Wall Street were the only ones that suffered when it crashes, it would be at least a little justice. Most Americans aren't greedy to the point of warping a market into a racket. That is, unless they are involved in bubbled 401k portfolios and that other way-overvalued racket of shack speculation and flipping.

Of course, we know that's never true.

When greed and insanity outweigh real fundamentals driving value, it's Main Street that gets it.

The long term effects of outsourcing a real economy, and supplanting it with a fake one, continues...

DEMIZEN's picture

nothing algos cant fix.

Deep Snorkeler's picture

In 2009, the political-economy

was our torturer.

Today, it is our savior.  

Thus we love our nation

all the more.

I submit to crazed impulses

to buy houses, stocks, cars

and Ivanka bags.

Anything goes, nothing matters

in the New Trumplandia.

Keep the party going.

Bricker's picture

Which means that the market will march higher.

JailBanksters's picture

Yeah Yeah Yeah, overvalued, the bibble of all bubbles, blah blah blah

Just bubble up and move on.