Fifty-seven percent of fund managers believe U.S. equities are overpriced, according to a survey of 78 mutual and 201 institutional fund managers that Merrill Lynch conducted between July 4 and July 11.

However, 74% expect equities to increase in value a year from now, and 37% expect double-digit returns by that time, the survey showed.

Furthermore, in spite of strong flows into fixed-income products, 48% of the respondents remain overweighted in equities, 49% are underweighted in bonds, and 66% do not expect bonds to outperform equities a year from now.

"While investor perceptions of American markets continue to get worse, the expectations for equities as a whole have held up much better than might have been expected from recent market action," said David Bowers, chief global investment strategist at Merrill Lynch. "Fund managers have not lost confidence in equities as an asset class."

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