Fund managers' pessimism on UK at record high, BofA-Merrill says

However, pessimism towards the UK hit an all-time high, the survey showed, with 42% of fund managers saying they were 'underweight' the region.

Thus, according to the latest monthly Bank of America-Merrill Lynch's survey of fund managers, their average cash balance edged lower from 4.7% in February to 4.6% for March, with the funds allocated to lenders' shares reaching the second-highest reading ever recorded.

Yet Michael Hartnett, BoA-ML's chief investment strategist, said: "Cracks in the bull case are starting to emerge, with fund managers citing concerns over trade, stagflation and leverage.

"Investors have yet to act on these fears, however, as rates and earnings are keeping the bulls bullish."

According to the poll's results, which was conducted between 9 and 15 March, at 30% the proportion of investors concerned by the threat of a 'trade war' was at its highest level since January 2017, followed by worries regarding inflation (23% of respondents) and slower global growth (16%).

Regarding the latter, expectations for faster growth nearly halved, falling by 19 percentage points to 18% - the least since the Brexit vote.

On the other hand, 58% of investors canvassed expected companies' earnings per share globally would rise by over 10% over the next 12 months.

"Fund managers are stubbornly long global stocks, banks, and tech, while remaining short bonds and defensives.

"Investors are reducing risk by increasing allocations to defensives such as staples, REITS, the U.S. and banks; they are rotating out of cyclicals and value plays including energy, discretionary, materials and the UK," BoA-ML said.

Even so, and for the first time since 2009, a majority of fund managers did not expect the Japanese yen to weaken over the next 12 months, with a net 26% of managers still overweight Japanese stocks.