The exact phrase doesn't make sense, more about that later.
Yes, it sounds like a description of stocks on the stock market, although the stock market could be used as a metaphor for something else.
"Valuation" means the process of deciding what a stock should be worth. (It's not an exact process). It can also be a word for "the prices being paid, in general, for a group or category of stocks."
"Trading" means the actual buying and selling of shares of stock. The process is really an auction. Each trade is the result of an individual bargain between a willing buyer and a willing seller. Of course nowadays the buyers and sellers may be computers.
I do not understand the exact phrase "valuations trading at fair values" because "valuations" do not "trade."
These sentences do make sense: "So-and-so thinks that dividend stocks are overvalued and that their prices are likely to fall. However, I think current valuations are justified and that they are trading at fair value."
It means: "So-and-so thinks that investors have gotten too excited about dividend stocks and are willing to pay too much for them. I think that investors are determining their value in a justifiable way, and that the actual prices being asked for these stocks in the market do represent their fair value."