Investors are more convinced that equities are expensive than at any time in the history of the BoA ML survey.

A global survey of investors by Bank of America Merrill Lynch found that they were more certain that equities are expensive than ever before in the 16 years of the current format of this report.

The survey of 210 panellists with $596 billion in assets under management, conducted earlier in June, found that a net 44 per cent of investors surveyed say equities are overvalued, the highest response on record and up from net 37 per cent in May.

A net 84 per cent of respondents said the US is the most overvalued region for equities, a new all-time high; investors find European equities (net 18 per cent) and emerging market equities (net 48 per cent) to be undervalued.

“Market vulnerability to profit weakness is very high,” said Michael Hartnett, chief investment strategist, “with investors’ perception of excess valuation coinciding with high global profit expectations.”
With such a cautionary mood in mind, average cash balance rose to 5.0 per cent, up from 4.9 per cent in May and still above the 10-year average of 4.5 per cent.

Turning to the role of central banks, a net 47 per cent of investors surveyed say global monetary policy is “too stimulative,” the highest number in over six years, BoA Merrill Lynch said. 
Looking for specific risks, Chinese credit tightening ranks as the top potential “tail risk” for the second straight month (31 per cent), with 61 per cent of investors saying tighter Chinese monetary policy will slow the country’s PMI but have little impact on global growth.

Allocation to Eurozone equities remains near two-year highs (net 58 per cent overweight, down from net 59 per cent overweight in May).