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BofA: Record number of managers think equities are overvalued

A record number of money managers think global equities are overvalued, said Bank of America Merrill Lynch's monthly fund manager survey released Tuesday.

A net 44% of managers this month said global equity markets are overvalued, up from a net 37% in May.

Broken out by region, a record net 84% of survey respondents said this month that the U.S. is the most overvalued region for equities, compared to a net 82% last month. On the flip side, a net 18% and 48%, respectively, said this month that European equities and emerging markets equities are undervalued, compared to a net 20% and 44% in May.

The June survey also found that investors' global growth and inflation expectations have fallen. Only a net 39% of investors this month predicted a stronger economy over the next year, down from a net 62% in January. Also this month, 60% of investors expect a higher global consumer price index over the next year, down from a net 75% in April.

Other findings from the June survey include:

  • a net 47% of managers believe global monetary policy is “too stimulative,” the highest reading in more than six years;
  • Chinese credit tightening continues to be viewed as the biggest tail risk according to 31% of investors, followed by a crash in global bond markets (18%) and a delay in U.S. corporate tax reforms (14%);
  • only a net 7% of managers believe the U.S. dollar is overvalued, the lowest level since the U.S. election and down from a net 23% in May;
  • global equity and Japanese equity allocations fell to net overweights of 40% and 1%, respectively, compared to net overweights of 45% and 12% in May. Meanwhile, U.S. equity, U.K. equity and emerging markets equity allocations rose to a net 15% underweight, a net 23% underweight and a net 42% overweight, respectively, vs. a net 17% underweight, a net 27% underweight and a net 41% overweight last month.
  • eurozone equity allocations remained relatively unchanged at a net 58% overweight, compared to a net 59% overweight last month.

The survey of 210 money managers representing $596 billion in assets under management was conducted June 2-8.