CFA UK survey reveals investors see better value in government bonds than previous quarter
But level of respondents finding value in emerging market equalities declines to the second lowest level seen since the first Valuations Index survey in 2012
Investors turn to gold, typically seen as a safe haven
23 August 2018 – CFA UK today released the results of its latest Valuations Index, which measures investors’ perceptions of the value of equities, bonds and gold.
The survey indicates a risk-off mentality amongst investors in Q2 2018, with those polled seeing most value in safe haven assets.
According to the Index, investors’ outlook on government bonds has improved compared to the previous quarter. Perceptions of overvaluation decreased 4%, dropping from 80% in Q1 2018 to 76% in Q2 2018. The yield of government bonds, meanwhile, increased slightly over the same period.
On the other hand, the Q2 2018 survey reveals that 4% more respondents are struggling to find value in emerging market equities. Although more than two thirds of investors polled still believe emerging market equities are either undervalued or fairly valued, this is the second most bearish observation of the asset class since the Valuations Index began.
Investor’s views of developed market equities remain largely comparable with Q1 2018. Whilst the percentage of respondents noting overvaluation is considerably lower than the recent peaks in Q3 and Q4 2017 (74% and 73% respectively), at 64%, it is clear that concern continues.
Perceptions of corporate bond overvaluation also remain very high, with 79% of respondents now perceiving the asset class to be either somewhat or very overvalued. At 1.96%, the yield is currently its highest since Q1 2016.
Gold, meanwhile, is seen as better value in Q2 2018 than ever before in the Valuations Index. Eighty percent of investors polled said they perceive gold as either fairly valued or undervalued, representing a 40% increase since CFA UK’s first survey of investors in Q1 2012 and a 6% jump from the last quarter.
Says Will Goodhart, chief executive of CFA UK:
“Our survey suggests an overall decrease in risk appetite amongst investors. Respondents’ confidence in emerging market equites has declined, and investors are turning towards government bonds and gold. This shift is likely a response to global trade tensions and fears of increasing tariffs ultimately putting pressure on consumer prices. That gold in particular is now seen as better value speaks to investors’ anxiety about valuations in both equity and fixed income markets. Considered a safe haven and inflation hedge, gold may be a popular choice throughout 2018.”
Notes to editors:
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About the Valuations Index
The Q2 2018 Valuations Index survey closed on 19 June 2018. Investors polled were asked to give their perceptions based on the following values: developed market equities (represented by MSCI Developed Market Index), $2120.80 at close 18 May 2018; emerging market equities (represented by MSCI Emerging Markets Index), $1137.75 at close 18 May 2018; government bonds (represented by J.P. Morgan Global Government Bond Index), yield 1.66% at close 18 May 2018; corporate bonds (represented by S&P International Corporate Bond Index), yield 1.91% at close 21 May 2018; and gold (represented by the London spot fix), $1288.49 at close 21 May 2018. The survey was open to all CFA UK members and there was a total of 170 respondents.
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.
About CFA UK
Part of the worldwide network of member societies of CFA Institute, CFA UK represents the interests of 11,600 investment professionals in the UK.
 Percentages have been rounded to the nearest whole digit