Global investors are currently holding 5.7% of their portfolios in cash, up from 5.5% in May and the highest level since November 2001, according to the latest Bank of America Merrill Lynch Fund Manager Survey.

The new poll, conducted last week, found risk appetite and global equity allocation at four-year lows.

Investors’ risk aversion was consistent with recession, yet profit expectations rose to a six-month high and global inflation expectations to a one-year high, according to the survey.

“While corporate bond and U.S. stock prices are at record highs, investors have a mountain of cash, which means negative summer events could thus quickly become tradable buying opportunities,” Michael Hartnett, chief investment strategist at the bank, said in a statement.

Bank of America noted that average cash balances above 4.5% generated a contrarian buy signal and cash balances below 3.5% a contrarian sell signal.

Twenty-seven percent of investors polled cited long quality stocks as the most crowded trade. Fourteen percent said long cash was most crowded, 12% cited short emerging markets and 11% said long U.S. dollar.

The June survey showed that global investor positioning shifted from May to June with rotation out of discretionary, energy and equities into U.K., healthcare/pharma, bonds, industrials and commodities.

Thirty percent of investors continued to consider the prospect of Britons’ voting the exit the European Union on June 23 the biggest tail risk by far, followed by 18% who worried about quantitative failure and 15% who considered China devaluation/defaults as the biggest tail risk.

Two-thirds of respondents believed Brexit was either “unlikely” or “not at all likely.” BofAML said this explained why a record net 26% of investors thought that the British pound was currently undervalued.

On Tuesday, Reuters reported that momentum had swung toward a “leave” vote, unsettling investors. It said a YouGov poll conducted for The Times showed 46% supporting Brexit, compared with 39% wanting to remain in the EU and 11% undecided.

Just a week ago, The Times/YouGov had found the remain campaign ahead by one percentage point, Reuters said.

According to the fund manager survey, two out of three investors expected the U.S. Federal Reserve to be hawkish, but they did not foresee a rate hike in June.

Nearly half of respondents expected incremental easing to emerge from the Bank of Japan’s meeting this month.

Asset Allocations

The June fund manager survey showed the following asset allocation trends:

  • Allocation to equities dropped to four-year lows: net 1% overweight from net 6% overweight in May
  • Allocation to bonds improved to 3.5-year highs: net 34% underweight from net 41% underweight in May
  • Commodities allocation jumped to a 12-month high: net 12% underweight from net 19% underweight last month
  • Allocation to emerging market equities improved to 21-month highs: net 6% overweight from net 2% overweight last month
  • Eurozone equities allocation was unchanged at net 26% overweight
  • Allocation to Japanese equities was unchanged at net 6% underweight

An overall total of 213 panelists with $654 billion in assets under management took part in the June fund manager survey.

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