The ‘Valuations Index’ found the proportion of respondents who view government bonds as being overvalued has risen 9% to 79% since Q3 2015, while the number who consider corporate bonds to be overvalued has risen 7% to 73%.
The CFA Society said the findings suggest that the feeling in Q3 2015 that the ‘bond bubble’ may be easing was only temporary.
Sentiment on equities was better, with 52% of respondents saying they regard developed market equities as being overvalued while 13% see the asset class as being undervalued.
There was some improvement in opinion on emerging markets with the number of respondents who consider emerging market equities to be undervalued up 11% over the last quarter to 57%.
“When we last canvassed members for their views, the Fed had surprised the market by failing to raise rates and concerns around China were abating,” said Will Goodhart, chief executive of CFA UK. “The respondents to this quarter’s survey are feeling less optimistic. Global economic conditions remain weak meaning that there is little prospect of further significant improvement in operational earnings.
“The current surge in M&A activity looks like a late-cycle indicator and, while markets welcomed the Fed’s rate rise as a small step towards rate normalisation, the flattening in bond yields betrays a lack of confidence in the prospects for growth,” Goodhart continued. “In those circumstances, a resumption of concerns about valuations across developed bond and equity markets is unsurprising.”
