E*Trade Survey: Investors See A Bubble

(Business Insider) Most investors believe the stock market is in bubble territory according to a new survey from E*Trade Financial.

Out of 904 active investors who manage at least $10,000 in an online brokerage account, 66% of them think the market is either fully or somewhat in a bubble, according to E*Trade. An additional 26% said the stock market is "approaching a market bubble," while only 8% said stock valuations are "not close to a market bubble."

The survey also revealed that recession fears linger. 32% of investors listed a recession as their top portfolio risk right now.

Bubble fears have come into sharper focus as stock valuations soar. Individual stocks like Tesla have ballooned, but the broader market is higher than average as well. The S&P 500 gained 16% in 2020, while the Nasdaq soared 43%. 

British investor Jeremy Grantham said on Tuesday that the stock market is in a "fully-fledged epic bubble," driven by extreme overvaluations, explosive price increases, frenzied issuance, and "hysterically speculative investor behavior." 

Mohamed El-Erian said on Thursday the market is in a "rational bubble," propped up by investors confident in the Fed's continued support.

Despite bubble concerns, bullish sentiment for investors has climbed. 57% of the surveyed investors said they're "bullish," which is up 5 percentage points from last quarter's survey. 

"Investors see that unprecedented fiscal stimulus, the Fed's easy monetary policy, the vaccine rollout, and relatively healthy earnings are all positives for the market," said Mike Loewengart, Managing Director of Investment Strategy at E*Trade Financial. "Yet at the same time there is awareness that some, if not all, of these factors may already be priced in, and market corrections are a matter of when, not if."

The survey was conducted from Jan.1 to Jan. 7, 2021 among an online US sample of 904 self-directed active investors who manage at least $10,000 in an online brokerage account. 


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