Stocks Are Overvalued, According to Experts

By Douglas A. McIntyre Published Aug 11, 9:15AM EDT

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A recent analysis confirms that institutional investors believe the market is significantly overvalued.
They believe that a trade war will start a recession and that inflation will keep the Federal Reserve from making rate cuts.
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Several pieces of research show that institutional investors are selling stocks that individual investors are buying. The market has become frothy. “Meme stocks” have returned to the market. Some of these get bid up much higher than their rational valuations and then crash.

A new poll from Bank of America confirms that institutional investors believe the market is significantly overvalued and that it is about to get a major reset downward. “About 91% of participants indicated that American stocks are overvalued, the highest ever proportion in data going back to 2001,” according to Bloomberg.

One reason respondents worry about the rising market is that, after a correction in April, the market has been on fire. Another is that the S&P 500 is trading well above its 10-year forward 12-month price-to-earnings average. The figure today is 22.26x. In late October 2024, it was 17.23x.

The bank does the survey monthly. It was in the field between July 31 and August 7. It included 169 managers who oversee $413 billion in assets.

What are the biggest worries? According to Bloomberg, 29% believe a trade war will start a recession, and 27% believe that inflation will keep the Federal Reserve from rate cuts.

Another reason that institutional investors worry is that there is an artificial intelligence (AI) equity bubble. Fourteen percent report this as a risk.

Bubble anxiety is not new. Meta Platforms Inc.’s (NASDAQ: META | META Price Prediction) price is up 31% this year while the S&P 500 is up only 9%. Microsoft Corp. (NASDAQ: MSFT) stock is up 25%.

One takeaway is that individual investors may be holding stocks that could be a big part of any substantial crash in the market.

Meme Stocks Can Crush You

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.