Investors brace for greater volatility in stocks, bonds and currency markets, BofAML survey shows
Global investors see a valuation bubble forming in both bonds and equities, with the US as home to the most overvalued financial assets, according to the Bank of America Merrill Lynch (BofAML) Global Fund Manager survey for April.
A net 25 percent of respondents to the global survey say equities are overvalued, the highest since 2000, BofAML says. The net percentage has increased from 23 percent in March and only 8 percent in February – though it’s still short of the record high of 42 percent registered in 1999.
Respondents voice concerns about overly high valuations in the US, with a net 68 percent of them saying US stocks are the most overpriced of any region in the world. Equities in Europe and Japan, according to the survey, are undervalued.
Meanwhile, the number of investors citing bubbles as the biggest tail risk to equity markets globally soared to 13 percent in April from 2 percent just two months earlier. In global bond markets, a net 84 percent of survey respondents say they see overvaluation. The figure, an increase from a net 75 percent in March, is the highest in the survey’s history.
About 85 percent of respondents expect the US Federal Reserve to raise interest rates at some point this year, increasing volatility in global markets. Eighteen percent say the currencies market will be most vulnerable to volatility, an increase from 13 percent in the previous month’s survey.
‘April’s survey offers further proof that global investors are front-running global monetary policy,’ says Michael Hartnett, chief investment strategist at BofAML’s global research, in a press release.
The survey also shows investors are switching from growth stocks to value stocks, with a net 25 percent predicting value equities will outperform growth equities this year, up from a net 6 percent in March.
