Investors are nervous about stock valuations getting out of hand. Stocks have continuously climbed higher in recent times. An increasing number of stock market professionals hold the belief that stock markets are presently over-valued. This view was echoed by a survey made among fund managers by the Bank of America Merrill Lynch. About 44 percent of total respondents believe that the equities have become extremely expensive. This is a decisive increase from the 37 percent who held identical views in May. The Standard & Poor has added approximately 1.6 percent. For 2017, the benchmark is slated to be 8.5 percent.
Stock concerns and parking money
Concerns were raised among investors when it came to the surge among technology stocks. Nasdaq occupies pedestal position in the crowded trade list. The survey also revealed that investors, in 2017, were afraid of popularity enjoyed by US dollar trade. This, however, has gone down in recent days, and have now reached the point where only about seven percent feel that the US dollar move is most crowded.
When it comes to parking money, Europe remains the continent of choice. Equity allocation in this case is overweight by net 58 percent. This number is near its two high highs. Cautiousness is also observed among retail investors when it comes to the stock market. About 35.4 percent of American Association of Individual Investors surveyed exhibit optimism when it comes to stock market. This figure is a rise of 8.5 percent compared to the first week of June. The survey also revealed that 29.5 percent of the respondents have assumed the bear position. This is near long term historical average.
According to Mark Hartnett of Bank of America Merrill Lynch, the market is extremely vulnerable to profit weakness. The chief investment strategist also said that the perception of high valuation among investors has coincided with the higher global profit anticipation. This overvaluation concern has coincided with the record exposure of hedge funds towards stocks. As per a report published by Bank of America Merill Lynch, the hedge fund portfolios enjoy 73 percent net exposure to equities, akin to 2015's second quarter levels.
Bonds have seen a serious influx of money in recent times. About $16 billion bonds have been invested in fixed income funds. This is the biggest inflow during the span of recent two years. The stock funds, in contrast lost about $1.3 billion during the same period.