A shocking 84% of Fortune 500 CFOs say the US stock market is overvalued, in response to a survey launched Thursday by Deloitte. That is up from the 55% who felt that method 1 / 4 in the past. Simply 2% of finance chiefs say US stocks are undervalued.At the same time as elevated ranges of unemployment present that the true financial system continues to be affected by the pandemic, the S&P 500 has skyrocketed 55% since its March 23 lows. Not solely has the index recovered all its losses, but it surely’s even set new highs. The Nasdaq has climbed a staggering 70% over that span.But the leaders of Company America will not be almost as euphoric as Wall Street’s blockbuster numbers would recommend. CFOs’ optimism about their very own firms rebounded sharply off document lows, 60% of these surveyed by Deloitte say the North American financial system is in dangerous or very dangerous form. Simply 7% say financial circumstances are good. For the primary time within the decade Deloitte has been doing the survey, CFOs had been extra bullish on the Chinese language financial system than on North America’s.Furthermore, the share of CFOs who anticipate higher financial circumstances within the subsequent yr in North America dropped from 58% to 42%. Taken collectively, Deloitte stated the findings recommend “rising skepticism concerning the tempo going ahead.”Market valuations close to 20-year highsYet there seems to be little of that skepticism on Wall Street as traders pile into stocks in response to unprecedented straightforward cash from the Fed.The surge in stock costs has pushed conventional valuation metrics to ranges unseen in a long time. The S&P 500 closed Tuesday at 22.6 occasions projected earnings, in response to FactSet. That price-to-earnings ratio is effectively above the 5 and 10-year averages of 17.1 and 15.4, respectively. In truth, it is only a contact beneath the height P/E ratio, which hit 22.9 on June 8. That was the best P/E ratio since September 2000, simply earlier than the implosion of the dotcom bubble.Citigroup’s Panic/Euphoria Model is probably the most euphoric it has been because the dotcom bubble, not too long ago hitting ranges that previously signaled stock market declines to return. And the CNN Enterprise Concern & Greed Index is solidly in “greed” territory, although it stays out of “excessive greed,” a minimum of for now.FOMO is realTaking benefit of this market euphoria, a gentle stream of firms are racing to cash in by promoting their stock to the general public. There have been 41 public choices worth a complete of $16.Four billion this month alone — probably the most for the month of August on document, in response to analysis agency Dealogic. That features IPOs in addition to choices by way of particular function acquisition firms, or SPACs. In current weeks, unicorns together with Airbnb and Palantir have revealed their intent to go public, too.”Sentiment is more and more constructive, and the worry of lacking out is changing into a robust driver for traders to get again available in the market,” Brad McMillan, chief funding officer at Commonwealth Monetary Community, wrote in a observe on Wednesday.McMillan urged traders to remain rational. “We should always not get caught up within the pleasure,” he stated. “All-time highs are nice, they usually typically result in additional highs. However they’ll additionally sign elevated danger.”Simple cash underpins optimismOf course, there are some legitimate causes for market valuations to have climbed so sharply. Traders sometimes sniff out financial recoveries lengthy earlier than Fundamental Street feels them. And despite the fact that GDP collapsed in the course of the second quarter, a rebound is clearly underway. The Atlanta Fed’s GDPNow model is asking for GDP to climb by a 25.6% annualized charge within the third quarter. Company America’s backside line is shrinking, however possibly not by as a lot as feared. Per-share earnings had been almost $Eight higher than anticipated in the course of the first half of the yr, in response to Citi. Some forecasts for 2021 are additionally rising.And there are hopes of a medical breakthrough that makes it simpler to deal with and even vaccinate towards coronavirus.The true key to the market restoration is the Fed. By slashing rates of interest to zero and promising to maintain them there for the foreseeable future, the US central bank is basically forcing traders to guess on stocks. The returns on ho-hum authorities bonds simply do not look engaging.”Stocks are simply not that prime in comparison with the tremendously overvalued bond market,” stated Michael Kelly, who leads the worldwide multi-asset enterprise at PineBridge Investments. Kelly stated he isn’t involved that stocks are in a bubble as a result of the Fed is more likely to preserve rates of interest extraordinarily low for a really very long time. If that occurs — and company earnings rebound — then stocks would appear to be an excellent deal.”If cash flows can get again to the place they had been,” Kelly stated, “then all the pieces is rational.”‘Shades of 1999’ however…Some market skeptics are chucking up the sponge.Citi had been warning the S&P 500 may drop to 2,900 (from almost 3,500 immediately) by year-end. However in a reversal, Citi on Monday raised its year-end goal to three,300 partially due to “unbridled Fed easing.””Regardless of euphoric readings on our sentiment metric and fewer engaging valuation, equities proceed to advance and may admire extra if traders wish to chase the tape,” Tobias Levkovich, Citi’s chief US fairness strategist wrote in a observe to shoppers on Monday. “Certainly, we see shades of 1999 however the Fed began tightening then and there is not any trace of a repeat now. “If something, the Fed is making it very clear that it plans to assist the financial system, and by extension the market, for so long as it takes.”We nonetheless suppose the market may be forward of itself however the Fed will do ‘no matter it takes’ to forestall US stocks declining by teen-like percentages,” Levkovich wrote. In different phrases, markets is likely to be overvalued, however that does not actually matter if the Fed retains its foot on the pedal.