Sanlam Investment Management’s head of asset allocation and macro research, Frederick White, said confidence had deteriorated in each of the attributes measured

something that happens very rarely.

“The valuation confidence has moved down the most over the past year and continues to make new lows. This is consistent with the strong rise in equity markets since March, as a growing concern about valuation would be a rational response to a market that rises in excess of the trend return expected from equities.”

About 52% of respondents considered the market too expensive, while 2% thought it too cheap, White said.

Institutional investors became more concerned about valuations, with two-thirds viewing the market as too expensive and none thinking it too cheap.

“There have been only two previous (occurrences of) such high levels of consensus among institutional investors, October 2008 and February 2009.”

On both occasions nearly 70% saw the market as too cheap. They turned out to be right, as strong equity returns followed the turning points in equities coinciding with these peaks in optimism.

“It remains to be seen whether their collective sentiment can get it right the other way round, preempting a period of lower market returns,” White said.

The 12-month return expectation continued to decline.

“Investors now expect the market to close one year out at a level just 5% above where it was last week. Even after adding dividends, it would provide a very low real total return (near zero in the case of institutional investors).”

The percentage of respondents deeming the probability of a market crash to be higher than 10%, jumped from 37% to 53%, with the average probability of a crash rising from 15,6% to 19,9%.

Behavioural Finance executive director Gerda van der Linde said the consensus revealed the local stock market was too expensive. “The question remains whether they’ll again be accurate.”