Global fund managers are increasingly concerned about the risk of overvaluation in both bonds and equities, according to the latest BofA Merrill Lynch Fund Manager Survey.

The April edition of the survey finds that a net 25% of respondents say that global equities are currently overvalued, up from 23% in March, and a net 8% in February. This is its highest level since 2000; and, 13% believe that “equity bubbles” are the biggest tail risk markets are facing, up from 2% in February.

At the same time, concerns about overvaluation in the bond markets are at a new high, with a net 84% of the global panel saying that bonds are overvalued, up from a net 75% in March. This concern about overvaluation is centred on the U.S., with a net 68% of respondents saying that the U.S. is the most overvalued region. Global panelists believe that all other regions, including Europe and Japan, remain undervalued, Merrill notes.

These views come against a background of expected rate hikes by the U.S. Federal Reserve, with 85% expecting rates to rise this year. “April’s survey offers further proof that global investors are front-running global monetary policy,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Research.

With the Fed expected to start tightening monetary policy, investors also foresee currencies facing higher volatility, Merrill says. It reports that 18% of the global panel says that currencies is the asset class most vulnerable to volatility. And, the proportion of respondents saying the U.S. dollar is overvalued has risen to a net 13%, it says. Conversely, a net 8% believe the euro is undervalued this month, compared with a net 24% saying it was overvalued two months ago. Nevertheless, it reports that a majority of investors still expect the dollar to appreciate, and the euro to depreciate, in the coming year.

The appetite for European equities has declined a bit from the previous survey, with a net 46% of asset allocators overweighting eurozone equities, down from 60% in March. A net 37% of investors say the eurozone is the region they most want to overweight in the coming 12 months.

Japan also remains in favour with investors, Merrill reports. The proportion of asset allocators overweight Japanese equities remains at 38%, it says, and the proportion of investors seeking to overweight Japan in the coming year rose to a net 22% from 10% last month.

In terms of sectors, asset allocators are currently favouring growth sectors, such as technology and consumer discretionary, Merrill says. Yet, it also notes that global investors are indicating that they will start prioritizing value over growth investing. The proportion of fund managers predicting that “value” will outperform “growth” in the coming year is up to a net 25% from a net 6% in March.

An overall total of 177 panelists with US$494 billion of assets under management participated in the survey from April 2 to 9.