Stocks are trading at their most expensive level since 2000 says Bank of America Merrill Lynch’s (BAML) latest investor survey. The survey covers investors that manage around $592b worldwide and was taken March 10 to 16; a period of time which included the US Federal Reserve interest rate rise.

The survey reveals 34% of fund managers believing equity markets are overvalued, which represents the highest proportion in 17 years. 81% believe the US stock market is the most overvalued, which is quite stark when comparing to their thoughts on other markets. 44% believed emerging markets were overvalued, and just 23% thought Eurozone stocks were expensive. The survey also revealed that the “long USD” trade is the most crowded trade. Crowded trades can cause sharp movements if traders need to unwind positions fast.

Are stocks about to burst?

This is clearly the billion dollar question, and over 1/3 of respondents believe higher interest rates will be the catalyst to any significant sell off, rather than weak company earnings. Specifically 1/3 believes US Treasury yields will have to rise above 3.5% before a bear market enters the fray. With US 10 year yields currently tracking around 2.4%, it looks like there is time on our side.

Finally, an overwhelming 57% believe global profits will improve over the coming year, which is a positive for bottom-up investors. European elections and possible Eurozone disintegration appear the biggest risk to this outlook.