Are you a market pessimist or optimist?

It is a question occupying the minds of investment commentators as markets continue their inexorable rise against a backdrop of historically low interest rates and, in the UK at least, an improving economy.

It is a question given more urgency by investors’ unsated appetite for equities. Capita Asset Services, registrar to many leading UK companies, has just released a report indicating holdings of UK equities among private investors are at a post-2008 financial crisis high (just short of £239bn), with most seeking the elixir that is dividend income.

Over the past seven years, said Capita, private investors have reaped an “astonishing” (Capita’s word) £58.3bn in dividends. By the time the year is out, private investors will have received UK dividends in 2014 totalling a record £11.3bn.

Furthermore, said Capita, by the year-end the value of private shareholdings will have eclipsed the record reached in May 2007. If only Margaret Thatcher was around to hear such cheer.

Capita’s analysis confirms earlier data from the Investment Management Association that showed net retail sales of investment funds in April were just short of £3bn, compared with £2bn in the same month last year. Surprise, surprise: sales were dominated by UK equity income funds.

Against this backdrop – although there is no consensus among experts – the stock market pessimists are beginning to bubble to the surface. They believe the good times cannot continue.

The stock market pessimists are beginning to bubble to the surface

In recent weeks, Jason Hollands, managing director of London-based adviser Bestinvest, has talked about the “calm before storm”, stating: “While none of us has a crystal ball to predict the short-term pattern of markets, gut instinct tells me that when markets are high, compelling valuations are absent across most asset classes and retail fund flows have soared, it is time to be a little more cautious.”

He is not a lone voice. Brian Dennehy, managing director of FundExpert, refers to “dangerous times” and the need for investors to “better understand the risks and have a clear idea of the downside”. To ensure his message is not misunderstood, he supports his comments with a quote from Aldous Huxley: “Facts do not cease to exist because they are ignored”.

London & Capital Asset Management, a global wealth and asset management company based in London, is also urging caution. It said six big risks overhang world stock markets: overstretched asset prices; the possibility of a “disorderly” market reaction to a further reduction in quantitative easing in the US; disappointing global economic growth; further crises in emerging markets, especially in China with the reduction in credit growth; deflationary dangers in Europe; and geopolitical risks, be it in Ukraine or the Middle East.

In light of such “risks” the company believes investors should “remain alert” and recommends “some weight to cash as a safety cushion in the coming months”.

Robin Angus, a director of Personal Assets Trust, an investment trust, is also firmly in the pessimist camp. In his wonderful commentary – a must, must read – accompanying the trust’s latest quarterly report, he has said he is reminded of the 1967 hit “Up, Up and Away” by The 5th Dimension when he looks at today’s markets: “Would you like to ride in my beautiful balloon? Would you like to glide in my beautiful balloon?”

Mr Angus’s answers are no and no. His view is that the multiple expansion in equity markets, especially in the US, is unsustainable in the long term. His conclusion: “The expectation that material earnings growth will be delivered by the current hesitant recovery is, we believe, at best premature and at worst mistaken.”

Not surprisingly, Personal Assets Trust’s portfolio is only 44 per cent exposed to equities – stocks Mr Angus describes as offering “solid value and dependable yields which will undergird our performance in the falling market we expect to see sooner or later”. They include of BAT (a favourite of star fund manager Neil Woodford), Diageo and Nestlé. The rest of the trust is invested in cash, inflation-linked securities in the US and UK and an 11 per cent exposure to gold bullion.

Of course, there are many out there in the investment world who vehemently disagree with Mr Angus et al’s pessimistic views of markets. At the very least they believe that the strong performance of the UK stock market can continue.

Among them is Richard Buxton, the manager of Old Mutual UK Alpha Fund who made his reputation at Schroders. He believes the UK stock market is at the start of a bull run that could last for the next decade. He said: “Falling inflation, positive growth in real incomes, further growth in employment, increased housing transactions – all of this should maintain the momentum of recovery and growth in the UK.”

I quite like the stance of my old colleague Stephen Womack on all this market uncertainty. Now a consultant with chartered financial planners David Williams in Northampton, he is underpinning the portfolios of his clients with global funds run by managers “with a proven ability to make good calls on which markets and economies are strong and which are weak”.

He is also using commercial property funds to provide clients with a mix of income and capital return. And he is not frightened to use structured plans where they can provide some defence against falls in stock markets or a way to profit from markets that move sideways.

The calm before the storm? Time will tell.

Jeff Prestridge is personal finance editor of the Mail on Sunday