Equities and bonds are overvalued, according to a net 54 per cent of fund managers, the Bank of America Merrill Lynch (BAML) has found in its latest global survey of the industry.
It also stated that the perceived overvaluation of stocks alone was at its highest level since May 2000.
The figure averages the percentage who regard each asset as overvalued.
Equity allocation relative to cash is the lowest it’s been in four years with cash levels rising from 5.4 per cent in August to 5.5 per cent in September.
Forty-two per cent said high cash was due to a “bearish view on markets” while 20 per cent cited a preference for cash over low-yielding equivalents.
BAML says the level of equity allocation relative to cash has “historically been a good entry point to stocks”.
Michael Hartnett, chief investment strategist, says “investors see an unambiguous vulnerability to ‘bond shock’ among risk assets”.
Harnett says negative interest rate trades and emerging market equities are the most susceptible if the US Federal Reserve and the Bank of Japan fail to reduce bond volatility this month.
Emerging market equities jumped to their highest overweight in three-and-a-half years, net 24 per cent overweight from 13 per cent last month.
Conducted last week, the survey questioned 208 participants with $579bn assets under management.