Of the 220 respondents to Bank of America’s (BofA) Fund Managers Survey (FMS) from August, nearly 1 in 2 (47 percent) respondents agreed that a weaker global economy is guaranteed over the next 12 months, with optimism for China fell to its lowest level since May 2022.

What’s more, 19 percent of FMA investors said they were taking lower-than-normal levels of risk, up from just 1 percent in July.

“Our broadest measure of FMS sentiment, based on cash levels, equity allocations and economic growth expectations, fell to 3.7 from 5 last month,” the bank said.

Faced with market jitters, investors are now net 8% overweight in bonds, with allocations to the asset class rising 17 percentage points on a monthly basis.

"FMS investors are the most heavily weighted bonds since December 2023," BofA said.

Investors also raised their cash allocations by 12 percentage points over the past two months, marking the biggest two-month increase since September 2022. to a net 6% overweight.

On the other hand, equity allocations fell 22 percentage points on a monthly basis to an 11% net overweight position – the biggest monthly decline since September 2022.

Allocations to Japanese stocks also posted their biggest one-month drop in more than eight years, from 7% overweight to 9% underweight.

Despite the Japanese yen's surge in recent weeks, 63 percent of FMS investors still think the yen is undervalued.

However, noting that underlying investor optimism was "shaken, not stirred", BofA said expectations of a global soft landing remained defiant, with the probability of a soft landing jumping from 68% to 76%.

"Major Optimism for 'Soft Landing' [remain] unchanged, but investors now expect a greater degree of Fed policy easing over the next 12 months to achieve this outcome,” the bank said.

Namely, 60 percent of FMS investors expect four or more rate cuts from the Federal Reserve over the next 12 months, with the first cut coming at the Federal Open Market Committee meeting in September, according to 94 percent of respondents.

At the same time, the likelihood of a US recession (39 percent versus 18 percent in July) has displaced geopolitical conflict (25 percent) as the top risk in the tail.