Investor perception of global bonds as overvalued reaches new record level

Monday 20 March 2017

  • Over 80% of investors polled consider corporate bonds to be overvalued, the highest level in five years. Government bonds are similarly perceived as overvalued.

  • Perceptions of overvalued developed markets equities remain high; emerging market equities broadly seen as undervalued.

The perception of corporate bonds as overvalued continued to climb for the fourth consecutive quarter reaching an all-time high. The proportion of investors polled believing them to be overvalued has reached its highest level in the five years since the first Valuations Index at 82%, a rise of 4% on the previous quarter. Similarly, government bonds continue to be widely viewed as overvalued, with 78% currently holding this view.

Though perceptions of equities being overvalued fell slightly over the quarter, developed market stocks continue to be viewed by the majority of respondents as overvalued (68%), whereas around half of respondents consider emerging market equities to be undervalued (48%).

Gold saw a marked fall in the proportion of respondents that view the asset class as overvalued, from 32% at the end of 2016 to 24% in the first quarter of 2017. Of all the asset classes, the greatest number of those polled (46%) believe the ‘safe haven’ asset to be fairly valued.

Says Will Goodhart, chief executive of CFA UK: “Despite some volatility over the past quarter, bond yields are pretty much as they were when we polled members at the end of last year. It appears that respondents find that somewhat surprising given the sense that growth and inflation are accelerating and that central banks are signalling strongly or weakly that interest rate-setting is entering a period of normalisation – for which read that rates will rise. Emerging markets equities have had good support over the past quarter, but respondents seem to believe that they may have further to run.”


Note: The research is not intended to provide a bellwether for the investment climate, or indeed to dispute the notion that markets reflect fair value over the long-term. Over the long run, markets are efficient and investors broadly rational. However, at any single point in time, markets can temporarily depart from fundamental value - our research indicates which asset classes our members think may no longer offer significant value, based on current prices, and others where there might be more value for new investments.