Investors’ average cash balance fell to 4.7% in October, the lowest level in 30 months and well below the high of 5.8% a year ago, according to the latest Bank of America Merrill Lynch fund manager survey.

“Cash balances dipped this month but remain somewhat elevated,” Michael Hartnett, Merrill’s chief investment strategist, said in a statement. “A faster drop in cash leading into 2018 would indicate a sell signal from investors.”

Cash remains above the 10-year average of 4.5%, and the fund manager survey cash rule holds that when average cash balance rises above 4.5%, a contrarian buy signal is generated for equities; when the cash balance falls below 3.5%, a contrarian sell signal is generated.

The new survey was conducted Oct. 6 – 12 among 207 panelists with $585 billion in assets under management.

The results showed that for the first time since March 2011, “Goldilocks” trumped secular stagnation. Translation: A record high 48% of investors surveyed expected above-trend growth and below-trend inflation.

The number of fund managers expecting below-trend growth and below-trend inflation fell 11 percentage points from last month to 34% in October.

Overall growth expectations jumped in October, with a net 41% of investors expecting a stronger global economy in the coming year, up from net 25% last month but well below the high of net 62% in January.

According to the October survey, investors were bullish on bond yields, with 82% of respondents saying they expected bond yields to rise in the next 12 months and a record net 85% saying bonds were overvalued.

Anticipating higher yields, fund managers rotated into banks and Japan — assets that benefit from rising interest rates and inflation — over the past month and out of utilities, emerging markets, health care and bonds, which are penalized by higher yields.

Sixty-eight percent of investors surveyed expected to see tax cuts in the U.S. in 2018, but said tax reform would not have a big effect on risk assets.

For the fifth time this year, long Nasdaq was considered the most crowded trade, cited by 29% of fund managers polled in October, followed by 18% who said long U.S./EU corporate bonds and 16% who cited long eurozone equities.

A policy mistake from the Federal Reserve/European Central Bank and North Korea changed places as the top two tail risks in October, cited by 24% and 23% of investors. In September, 34% of investors worried about North Korea and 21% about the Fed/ECB.

In addition, 22% of respondents in the new survey said a crash in the global bond markets was a tail risk.

Allocation to eurozone equities rose to net 58% overweight in October, up four percentage points from September and the highest in five months.

“Europe is in vogue according to global investors, with the overweight in eurozone equities back near record highs and EPS expectations accelerating,” Merrill’s European equity strategist Ronan Carr said in the statement.

“European investors remain positive on the macro outlook and are looking for a global reacceleration.”

In October, investors were net 21% underweight U.S. equities, up from net 28% underweight last month.

Allocation to emerging market equities dropped to net 41% overweight in October from net 47% overweight last month, and allocation to Japanese equities shot up 11 points to net 23% overweight.

“More investors are saying they want to overweight Japan over the next 12 months, but that still lags behind Europe and EM,” Shusuke Yamada, Merrill’s chief Japan FX/equity strategist, said in the statement.

“More ‘Japan catalysts’ may be needed to attract long-term investor interests.”

— Check out A $4 Trillion Hole in Bond Market May Start Filling in 2018 on ThinkAdvisor.