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A month after their confidence hit its lowest point since the financial crisis, investors added risk via equities, Europe, industrials and banks while rotating out of bonds, REITs, utilities and staples, according to Bank of America Merrill Lynch’s July global fund manager survey.

Investors’ allocation to global equities retraced nearly all of last month’s dip, rising to net 10% overweight from net 21% underweight, the lowest allocation to equities since March 2009.

Emerging markets equities remained the most favored regional allocation, with net 23% of investors overweight the asset class. The U.S. and the eurozone tied as the second most favored region, each at net 9% overweight.

Fund managers’ average cash balance fell from 5.6% to 5.2%, which was still above the 10-year average of 4.6%, and their allocation to cash ticked down two percentage points to net 41% overweight, also way above the long-term average.

The fund manager 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 dovish Fed and trade truce have caused investors to reduce cash and add risk, but their expectations of an earnings recession and debt deflation still dominate sentiment,” Merrill’s chief investment strategist Michael Hartnett said in a statement. “The pain trade for the summer remains up in stocks and yields.”

Net 73% of investors said the business cycle was a risk to financial market stability, marking an eight-year high, according to Merrill.

Fears about the credit cycle rose to the highest on record as a record net 48% of investors expressed concern about corporate leverage. Global profit expectations remained flat, with net 41% of those surveyed saying they expected deterioration in the next year.

A record 38% of the sample said corporate payout ratios, including share buybacks, were too high.

Fund managers’ global growth expectations rebounded by 20 points from last month’s decade low to net 30% that said they expected global growth to weaken over the next year.

Only net 1% of investors in the July poll said they expected a higher global consumer price index in the next year, the most bearish inflation outlook in seven years, Merrill said.

Concerns about a trade war eased in July, but stayed atop the list of tail risks, cited by 36% of investors, down from 56% in last month’s survey. Twenty-two percent cited monetary policy impotence, 12% a China slowdown and 9% a bond market bubble.

Thirty-seven percent of investors identified long U.S. Treasuries as the most crowded trade in July, while 26% cited long U.S. tech and 12% said long investment-grade corporate bonds was the most crowded trade.

The survey was conducted July 5 to 11 among 207 panelists with $598 billion in assets under management.

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