Recovery in the US has the Federal Reserve mulling an interest rate increase, while central banks across the emerging world and commodity-dependent countries such as Australia, New Zealand and Canada are easing monetary policy to stimulate growth and exports. "Markets are unlikely to move in lock-step," writes the report's author Amin Rajan, a well-known investment commentator. "Over the next three years, the five most attractive equity markets are likely to be – in descending order – the US, India, Japan, frontier markets and Asia, excluding China and India. "The bottom five will include the key commodity producers like Russia, Australia, Latin America, Canada and Eastern Europe," he said. The Australian market, he noted, had its best quarter in more than five years in the three months to March this year.

"All Australian asset classes are perceived as near full valuation," Mr Rajan said, although he also acknowledged that this year's interest rate cuts by the Reserve Bank of Australia "may provide a temporary boost". This year's survey report focuses on investor sentiment about the return of the so-called "cult of equities", after the spectacular collapse of stock markets during the global financial crisis. Some respondents believe the revival simply reflects the hunt for return in a world of ultra-low bond yields and high prices, the product of central bank asset-buying and subdued inflation expectations. Others, however, see more fundamental support for market levels. Either way, a large majority of respondents believe equities will remain attractive as long as bond yields are suppressed, and that current valuations will be sustained and reconnect with fundamental drivers.

"At a time when longevity risk is on the rise, equities are deemed to be providing an unlimited upside to tackle it," Mr Rajan says. "In contrast, bonds only offer a coupon. "As a result, around one in two respondents expects the sector rotation from bonds to equities – evident since 2013 – to continue," he says. He calls this the "bondification" of equities. Investment in companies with generous dividends, low debt levels, strong pricing power and a high return on equity is the favoured strategy of the full gamut of investors, says Mr Rajan.

"To be risk-averse is the biggest risk investors face," he said. "Their revived interest in equities is part of a balancing act. "On the one side, recognising that future returns for most asset classes will be much lower than in the recent past; and on the other side, avoiding the regret of missing what may be a once-in-a-generation bull market," he said. However, investors remain wary, with 55 per cent of survey respondents worried that quantitative easing may have borrowed from future returns. A total of 63 per cent, meanwhile, worry about volatility, while 56 per cent remain concerned that investors have become too reliant on central bank money-printing.

When asked what positive and negative factors would drive asset prices over the next three years, more than 80 per cent said the global growth outlook, which they also downgraded. The second most popular answer was the start of monetary tightening in the US. This view on the impact of the Fed's first interest rate increase for nearly a decade is also reflected in comments about the equity risk premium (ERP), which measures the additional rate of return on equities compared with bonds needed to justify the risk of holding them. The ERP hit a 20-year high of 14.5 per cent in the US in 2013 and still remains historically high. However, the metric has become distorted by extreme monetary easing, according to the report.

"Arguably, apart from cash, there are no risk-free assets today," argues Mr Rajan. "In a balanced portfolio, equities used to be the risk engine and bonds the safety valve. "The tables have now turned. "Bonds are an unsuitable benchmark for assessing equity risk premium in an era of artificially depressed interest rates," he said. The report says shares are winning favour even in countries with large, liquid bond markets and conservative investment communities.

"Even in rock-solid bond markets like Germany and the Netherlands, equities have gained momentum lately in an agnostic search for decent returns, while bonds trade at stratospheric values far removed from reality," says Mr Rajan.