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Some managers think the market is pricey again.
The good news for many investors is that the S&P 500 Index has rallied in the past few weeks from its recent low in March. The bad news is that the market may now be overvalued.
We reported back in February the views of two prominent fund managers--Jeremy Grantham of GMO (his firm advises Evergreen Asset Allocation
Jeremy Grantham has reined in his fair value for the S&P 500 Index in the past few months. In a March letter, he estimated the fair value of the S&P 500 to be around 900. But in his most recent May letter, he puts the benchmark's fair value at 880. The roughly 2% drop in estimated fair value may not seem like a big deal, but it does mean that U.S. equities may not be a screaming bargain any longer.
Hussman recently posted a similar message in his weekly commentary. As of May 4, Hussman wrote, "Market climate for stocks was characterized by modest overvaluation on virtually every measure that does not assume a return to record 2007 profit margins. Most likely, stocks are priced to deliver total returns in the area of about 8% over the coming decade, which is not hostile valuation, but is certainly not strongly compelling, particularly in an extremely overbought and uncorrected market."
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