A record number of top money managers believe stocks are overvalued, calling the current market the “dumbest in history.” Despite this, they continue to buy overvalued stocks, driven by FOMO. The S&P 500 now trades at a staggering 40 times the average earnings of the past 10 years, raising concerns of a bubble.

The latest BofA Securities survey reveals that a net 60% of fund managers view global equities as overvalued, with 54% believing AI stocks are in a bubble. Despite these warnings, managers are heavily overweight in stocks, especially in volatile markets like emerging markets and banking stocks. Cash and Treasury bill levels are at record lows.

The fear of missing out is driving fund managers to keep buying overvalued stocks, despite widespread concerns about market bubbles. The survey was conducted before the recent selloff, highlighting the disconnect between market sentiment and investment decisions. This irrational exuberance may lead to risky investment strategies.

Investors are warned to evaluate their risk tolerance and consider rebalancing their portfolios as market valuations reach record highs. Bonds, cash, energy stocks, and the London stock market are out of favor among money managers. Timing the market is impossible, emphasizing the importance of a diversified and balanced investment approach. Investors are shying away from long-term bonds, fearing rising inflation and interest rates due to government debt. Despite this, Japan’s high debt hasn’t led to financial trouble. Some predict the U.S. may follow suit by using quantitative easing to lower interest rates, making long-term bonds attractive for contrarian investors like Hoisington.

Hoisington believes AI will disrupt the job market, automating tasks and reducing labor demand, potentially slowing the economy. This outlook is driving their contrarian move to invest in longer-term Treasury bonds over short-term options. If AI’s impact matches expectations, bonds could benefit while the economy faces challenges.

Read more at Yahoo Finance: Dumbest stock market in history? It’s even worse than you imagined.