Investors are wrongly expecting the bull market to end and are too risk averse, putting too little into stocks and too much into fixed income, according to BlackRock strategists.

The steady, modest expansion of the economy and the stock market's brisk increases have some years to go so stocks generally are not overpriced, they said in a new report. 

“We see low volatility as a normal feature of the benign economic and financial backdrop---and not as a warning sign in itself,” BlackRock officials said in a mid-year report released at a press briefing Tuesday at the company's Manhattan headquarters. “Taken together, this could mean equities are cheaper than they look---and investors risk being under risked.”

This underweighting of equities could cost investors several points in return over the next few years, possibly causing them to miss out on opportunities in emerging markets and Europe, BlackRock officials said.

Nevertheless, some investors fear that the equity markets, after some eight years of gains, are spent. However, Kate Moore, BlackRock's chief equity strategist, disagreed, explaining that equity markets are for the first time in years supported by fundamental measures.

“This is actually an earnings story as opposed to just a sentiment story or an asset class that looks the best relative to some of its peers,” she said.

Moore added that she has been “a Euroskeptic" for years, but now believes Europe and emerging markets offer good stock buys.

BlackRock officials said there is continued steady growth—what they called a global synchronized expansion—and they predicted global growth of about two percent a year.

However, Richard Turnill, BlackRock's global chief investment strategist, said many investors don’t believe that good times will continue. In part, he noted, the sentiment is based on history: Expansions tend not to last more than eight years.

“Many investors tend to think that we’re due [for] a recession—that the economic expansion is going to die of old age,” he said.

But Turnill argued that BlackRock’s analysis shows that expansions don’t die of old age; they die because imbalances build up. Turnill said that, because this expansion has been going on at an unusually slow rate, that at this time he sees no imbalances.

“It seems to me that we are not at end of a cycle, but somewhat in the middle,” he said.

So when will the expansion end?

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