Tags: Investors | wary | fully-valued | stocks

Morningstar's Michael Rawson: Investors Wary of 'Fully-Valued' Stocks

By    |   Tuesday, 22 July 2014 11:08 AM

Investors continued to pull money out of U.S. stock mutual funds in June, while they poured money into bond mutual funds, according to Morningstar.

Michael Rawson, an ETF analyst at the firm, says expensive stock prices have scared investors away. The S&P 500 sported a trailing price-earnings ratio of 19.5 Friday, up from 18.4 a year ago, according to Birinyi Associates.

"I think that [the stock fund outflow] has to do with the fact that the stock market appears to be fully valued," Rawson said on Morningstar.com.

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

"If we look at our [Morningstar's] price/fair value estimate, driven by our equity analysts, the stock market is at 103 percent of fair value, so the future returns are maybe still positive, but not as good as they would have been maybe a year or two ago."

As a result, "I think investors now are maybe a little more skeptical about putting money into the market," Rawson said.

While investors are now jumping into bond funds, he's concerned that when interest rates start to rise, there will be a "knee-jerk reaction" in the opposite direction.

Not everyone feels cautious about stocks. Jim Paulsen, chief investment strategist, doesn't see the turmoil in Ukraine and the Middle East taking down the market.

"Investors are learning that it's a loser's game to sell on the news," he told The Wall Street Journal. Recent developments "don't give you a sense that they're going to turn into some wider conflict."

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

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Investors continued to pull money out of U.S. stock mutual funds in June, while they poured money into bond mutual funds, according to Morningstar. Michael Rawson, an ETF analyst at the firm, says expensive stock prices have scared investors away.
Investors, wary, fully-valued, stocks
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2014-08-22
Tuesday, 22 July 2014 11:08 AM
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