More than two-thirds of fund managers in a global survey see U.S. stocks as expensive, and more than half see global equities as pricey, the highest level in nearly 12 years.
The fund mangers in Bank of America Merrill Lynch's monthly survey are also bullish small cap stocks, at a time when the Russell 2000 has lagged other indexes. Just 7 percent believe large caps will outperform small caps, the lowest level since the question was asked in June 2006.
Cash balances remain very high, reaching 4.6 percent in November. According to BofA analysts, a survey cash balance average above 4.5 percent is a buy signal for stocks. When the average cash balance falls below 3.5 percent, it is a sell signal.
The fund managers are also relying more on raising cash than buying protection against a fall in equity prices over the next three months. Fifty-one percent said they have not taken out any protection, up from 40 percent last month.
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While little over half see equities as expensive, when it came to U.S. equities, the number reached 68 percent. The investors did increase their equity allocations slightly in November, to a net 52 percent overweight from 49 percent, while increasing their underweight in bonds to a net 69 percent.
The tech sector was by far the biggest overweight in U.S. equities, followed by industrials, energy, discretionary and financials. The biggest underweight was utilities.
The fund managers are more confident in the global economic outlook, with 67 percent now expecting the world economy to strengthen over the next 12 months. But only 17 percent see above trend growth in 2014, and 31 percent say that G-7 bank lending needs to grow in order for the economy to achieve escape velocity.
Twenty-six percent say China and Asia need to see acceleration before the world economy can take off, and 15 percent say the U.S. needs to achieve fiscal reform. A little over 10 percent said a catalyst for escape velocity would be a lack of Fed tapering.
Only 21 percent of the fund managers expect the Fed to taper its bond buying before March, while 48 percent expect the Fed to start tapering in March.
The survey was answered between Nov. 1 and 7 by 222 panelists, with a combined $599 billion of assets under management.
—By CNBC's Patti Domm. Follow her on Twitter @pattidomm.