Fund managers have increased their hedging activity at the fastest pace in 14 months, according to a long-running survey conducted by Bank of America Merrill Lynch, as reported by Bloomberg. A net 73% of respondents indicate that they have taken out protection against the possibility of a sharp drop in the equity markets during the next three months, and their underweight positions in U.S. equities are at a ten-year high. This iteration of the survey was conducted between September 1 and 7, among managers who oversee a combined $629 billion of assets.

A particularly dire warning was issued recently by Wall Street analyst and fund manager John P. Hussman, who foresees stocks plummeting 60%. He sees widespread overvaluation, across all components and subsets of the S&P 500 Index. (For more, see also: S&P 500 Could Fall 60%: Hussman.)

Source: Bank of America Merrill Lynch, Bloomberg

More Reasons for Concern

Hussman is far from alone in his warnings about broad-based overvaluation. Other leading investors, analysts and market observers agree. One of them, Tom Forester of Forester Capital Management, adds that the collapse of valuations in one sector is likely to have a domino effect, dragging down the rest of the market with it, based on the history of recent market crashes. If he's right, that's cold comfort for investors who shunned high-flying sectors such as technology. They won't have anywhere to hide, Forester warns. (For more, see also: Bear Market Ahead: What 5 Big Investors Forecast.)

The massive and growing debt loads borne by governments, private businesses, and private individuals are another widespread concern. Cascading rounds of insolvency could bring down the markets, not to mention the global financial system and economy, in a replay of the 2008 Financial Crisis. A slightly different slant is offered by Alan Greenspan, former chairman of the Federal Reserve Board. He's more concerned about a huge bond market bubble, created by unprecedented infusions of liquidity by central bankers in response to the 2008 crisis. When that bubble bursts, the economy and the stock market will crater, Greenspan warns. (For more, see also: Stocks' Big Threat Is a Bond Collapse.)

Another lingering concern, at least for U.S. stock prices, is that a slow-growing economy is not providing the impetus for continued robust gains in corporate earnings. Meanwhile, rebuilding from Hurricanes Harvey and Irma will cause a costly diversion of economic resources.

Recent nuclear saber-rattling by North Korea also adds to the uncertainties and worries faced by investors.

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