As a result, he said that valuation premium of U.S. stocks could come under pressure over the coming quarters. The country's equities are trading at a price-to-earnings ratio of 20 - a 20 percent premium to the wider global market, according to HSBC.
"Our analysis shows that markets tend to underperform in the short term when valuations reach such an extreme," he said.
(Read more: Doll: 10% stock correction coming, gold going down)
Contrarian call: Underweight Japan
Despite widespread investor optimism over the prospects for Japanese equities, the bank maintains its underweight position on the market.
"Investors are almost unanimously positive on this market - so it is hard to see where the next marginal buyer will come from," Evans said.
"Our analysis of EPFR [fund-tracking firm] data shows that long-only funds are still underweight, but the least underweight they have been in the 10 years for which we have data; they are unlikely to buy more until signs appear that Japanese companies will raise ROE [return on equity] and improve corporate governance," he added.
Other factors contributing to the bank's dull outlook for the market include an expected slowdown in economic growth following the consumption tax hike in April.
(Read more: Is the honeymoon over for Japan equities?)
Additionally, Evans argues that analysts appear to be overly optimistic about the impact of a weaker yen on corporate earnings.
"Almost 35 percent of Japanese production is now overseas, compared with 37 percent of sales which come from overseas. Our work suggests that the yen has much lessimpact on earnings than 10 years ago," he said.
"This indicates that earnings may disappoint analysts' optimistic forecasts," he said.
—By CNBC's Ansuya Harjani. Follow her on Twitter:@Ansuya_H