According to a BofA Merrill Lynch research report, net 44% of investors think equities are now too expensive. However, this is almost exclusively due to perceptions about US equities, which is the most overvalued asset class according to 84% of respondents.
Investors still find European equities and especially emerging market equities undervalued. After the strong inflows into European equities year-to-date, allocations to eurozone equities are close to two-year highs.
Tech stocks, which experienced a minor correction last week, are considered most overvalued: three quarters of investors surveyed say internet stocks are expensive (57%) or bubble-like (18%).
“Market vulnerability to profit weakness is very high, with investors’ perception of excess valuation coinciding with high global profit expectations,” said Michael Hartnett, chief investment strategist at BofA Merill Lynch.
With central banks hesitant to respond to the current global macro momentum, a net 47% believe global monetary policy is now “too stimulative”. This is the highest number in over six years.