Members Have Mixed Feelings on Stock Valuations


This week’s Sentiment Survey special question asked AAII members how comfortable they are with current stock valuations. About 30% said they are either uncomfortable or have very little comfort with prevailing valuations. Many of these members said that stocks are still pricey even after the recent pullback. Others pointed to the slow pace of economic and earnings growth. Slightly more than 25% described themselves as being comfortable with current valuations. Many of these members said that the market’s recent volatility has lowered stock prices, making valuations more attractive. Roughly 10% of respondents described stocks as being fairly valued or said that their opinion depends on the stock or sector being looked at. Smaller groups of respondents said that although prices have recently declined, valuations are still high, or that they anticipate further declines in stock prices to occur.

Here is a sampling of the responses:

  • “Good. P/E ratios are now reasonable, so buying in moderate amounts is appropriate.”
  • “I feel that after this correction stocks have returned to more reasonable valuations.”
  • “Overvalued. Growth prospects are not strong and risks are rising that growth will turn negative.”
  • “They seem to be overvalued based on historical P/E ratios.”
  • “Depends on the stock. Some have been beaten down into buy territory. Others may still be overpriced or at fair value.”

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