Three-Quarters of Investors Concerned With Current Stock Valuations

In this week’s Sentiment Survey special question, we asked AAII members to elaborate on their comfort level with current stock valuations. A little less than half of respondents (45%) state that they are slightly concerned with current stock valuations. This compares to 32% of respondents who state that they are very concerned with current valuations. In these two groups, many cited high price-earnings (P/E) ratios and uncertainty of corporate earnings growth as reasoning for their concern. Conversely, 20% of respondents state that they are comfortable with current valuations given the low interest rate environment.

Here is a sampling of the responses: 

• “Valuations are presently stretched beyond earnings growth. The bond market has demonstrated an inverted yield curve, albeit short-lived, and that can signal a recession in the near future.”
• “The current level after 11 years of rising values makes one think seriously about allocation, but I’m still comfortable having 60% in equities.”
• “Progressively lower [comfort level] as reported earnings will show less growth and jobs growth will slow. When Tesla crashes from its overexuberant height, the market will panic.”
• “More confident than ever, the U.S. is the best global place to invest the world’s trillions. Also, more U.S. workers equals more 401(k) contributors, which means higher market valuations.”

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