The pessimism that sent investors running for government bonds and cash may finally be dissipating, a Merrill Lynch survey of global fund managers found, with a possible turn back to stocks.

“[A] widespread perception exists that stocks are cheap, both in absolute terms and relative to bonds,” the company wrote in a press release.

Forty-two percent of managers believe bonds are overvalued; 21 percent were overweight bonds in December, compared with 7 percent in November. Investors increased their overweight positions in four global sectors: health care, telecoms, utilities and consumer staples. Pharmaceuticals were popular with asset allocators, with 44 percent increasing their overweight positions in that sector.

Equity allocations for emerging markets are at the lowest level since 2001, the survey found. Seventeen percent of global asset allocators are underweight emerging market equities; of those, China is the most popular market, with 50 percent of managers saying they would overweight Chinese equities over other Asian markets.

As for the general sentiment surrounding the health of the economy, 36 percent of managers think the economy will worsen next year, compared to 60 percent only two months ago. More than one-quarter feel the economy will actually improve, the survey found.