A second measure to watch is a survey conducted by the American Association of Individual Investors (AAII). The survey tracks the percentage of self-described bulls and bears. As of the end of November, the percentage of self-described ‘bulls’ was slightly more than 47%, while those characterizing their views as ‘bearish’ was at 28%. Again, both metrics suggest bullishness, but not craziness.
The bottom line is that there is no one indicator that will definitely answer the question: Are we in a bubble? Investors need to piece together a conclusion based on multiple measurements, using metrics about both valuation and investor behavior.
For now, the preponderance of the evidence still suggests that stocks are not so overvalued, nor investors so exuberant, as to justify the ‘B’ word just yet.
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.
Source: Bloomberg