The proportion of fund managers who view equities as overvalued has hit a new record high, according to Bank of America Merrill Lynch (Baml).
The bank's latest global fund manager survey, gauging sentiment in June, found that a net 44 per cent of investors believed equities were overvalued. This marked the highest level on record, up from 37 per cent the month before.
The results underline the concerns many market participants have over equity markets, particularly in the US where indices have been rising swiftly for the past eight years. The S&P 500 has gained 9.2 per cent in local currency terms year to date, according to FE Analytics.
A net 84 per cent of respondents identified the US as the most overvalued region for equities, representing another all-time high.
Tech companies were in for particular focus, with three quarters of respondents identifying internet stocks as expensive or in a bubble. The main crowded trade, according to respondents, was being long the Nasdaq.
Tech stocks, the performance of which has started to struggle in the early days of June, have already caused consternation among some high-profile investors.
Last month Jupiter's Merlin team warned that the so-called Fang stocks - Facebook, Amazon, Netflix and Google - has increased their value by $269bn (£211bn) between March 1 and May 9 this year.
Product specialist Alastair Irvine described these gains, which came when the broader market remained relatively flat, as a "ringing of the bell" about the risks of current valuations.
Other signs of bearishness appeared in the Baml survey. Expectations for faster global growth, which reached 62 per cent in January, have since fallen to 39 per cent, with managers taking defensive action as a result of the changing outlook.
"The June fund manager survey sees a defensive rotation to staples and utilities and the largest drop since June 2010 in allocation to commodities," Baml said.
Commodities allocation levels fell from a net 3 per cent underweight to a net 15 per cent underweight.
Similarly, the average amount of cash held by respondents rose from 4.9 per cent to 5 per cent. The 10-year average for this metric was 4.5 per cent.
Meanwhile inflation expectations have continued to fall, with the proportion of respondents expecting higher global inflation falling from April's 75 per cent level to 60 per cent.
However profit expectations remained high, with 43 per cent saying global profits would improve over the next 12 months.
“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 the bank.
While the survey suggested macro momentum had peaked, its authors noted that not all conditions usually present in a bubble had appeared.
They noted, for example, that the tech-related bubble of 1999 saw a record share of managers perceiving excess valuations while cash levels fell. The current scenario showed less "irrational exuberance", the authors said.
Responses to the survey still indicated investors viewed Europe and emerging markets as attractive. A net 18 per cent saw European equities as undervalued, with a net 48 per cent thinking the same of emerging market stocks.
Allocations to eurozone equities remained near a two-year high, at a current net overweight of 58 per cent. Allocations to emerging market stocks rose from 41 per cent to 42 per cent.
In terms of investment factors, a net 42 per cent expected high-quality assets to outperform their low-quality counterparts, down from 44 per cent a month before.
A net 15 per cent expected value to outperform growth, marking a fall from a net 22 per cent a month before.
