A global survey by Bank of America Corp. finds a record share of fund managers seeing U.S. stocks as too expensive after the sharp rally since April lows.

A recent Bank of America Global Fund Manager Survey reports that 91% of investors believe U.S. stocks are overvalued, the highest proportion since the survey began in 1998. This perception exceeds levels seen during the dot-com bubble and the so-called 'everything bubble' of 2021. Despite this, investors have been progressively reducing their underweight positions in U.S. equities, and the overall exposure to global equities remains below the historical average.

The survey also highlights a persistent sense of macroeconomic pessimism among investors, with cash levels at a historically low 3.9%. While some see room for further gains in equity markets due to below-average positioning, others interpret low cash reserves as a warning sign that global risk assets may be overextended.

BofA says record number of investors find stocks overvalued

Bank of America out with its August Global Fund Manager Survey showing investors are the most bullish since February with a record 91% calling U.S. stocks overvalued. Joining us now to discuss is Elias Galou of Bank of America. Elias, welcome to the program. Let's just talk about that 91%. So a lot of people seem to think, many, in fact, the overwhelming majority believe that U.S. stocks are overvalued. How many are sure? How many are underweight at the moment? Hey, John. Look, I mean, clearly that's a very important question to our investors and clients because the valuation and the perception of global stock market valuation was really a highlight in this month's Global Fund Manager Survey, which was not really a decisive survey, not like the survey that came out in April, which was a clear moment to buy, or the survey from December 2024, which was a great moment to sell the market. But this month, the highlight was really the perception that global equity markets are overvalued. The highest share of investors saying they think the global equity market is overvalued since 1998 when we first started asking this question. The share topped even the highs observed during the Internet bubble in 1999-2000 or the everything bubble in 2021. And of course, the perception that global equity markets are very rich, overvalued, is driven by the U.S. equity market, with here as well 91% of FMS participants saying that they think the U.S. equity market is overvalued. Definitely, valuations are very important for long-term equity investors. In fact, that is the one factor that matters when you invest on stocks over the course of a 10-year period. However, this has not been an element that caused major concerns because investors continue to rotate towards the U.S. equity market. They were very underweight in April. This underweight is being cut progressively. And despite the very high perception of overvaluation, the FMS positioning in terms of U.S. equities remain net underweight, which is really a silver lining for U.S. stocks. Elias, the way you see things, is that this negative reservoir of pessimism that we can keep feeding on in the months to come, can we continue to see that grind higher? I think this negative reservoir of pessimism is really what emboldens the bulls right now because when you look at the results from the FMS survey this month, the bulls will really focus on the macro pessimism that in fact increased versus where it was in July. Macro sentiment worsened a little bit, but also the bulls will focus on the fact that global equity exposure stands below the historical average. Net 14% of FMS investors said they were overweight in the global equity market. The historical average since 2000 is roughly 25%. Based on these two metrics, the bulls will say there is further room to go in terms of positioning. However, there is also some substance to embolden the bear narrative and in particular the fact that the average FMS cash level remains at a low 3.9%, which historically has been a strong signal to say that global risk assets are toppy as now is a good time to retreat or hedge your position.

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