Global sentiment improved for the first time since June, the latest data from Bank of America (BofA) showed.

BofA’s September Fund Managers Survey (FMS) revealed that the broadest measure of fund manager sentiment — based on cash levels, capital allocation and economic growth expectations — rose from 3.6 to 3. 9.

Meanwhile, FMS investor risk appetite was reported at an 11-month low this month, with almost a quarter (23 percent) of investors saying they were taking “lower than normal levels of risk”.

The bank also noted there was a "major shift" from global cyclicals to sensitive bonds, as the number of investors expecting value to outperform growth was at a 10-month high.

"September saw a rotation into defensive sectors and out of cyclical sectors ... fund managers' relative net overweight in defensives (utilities and basic commodities) versus cyclicals (energy, materials and industrials) is now the highest since May 2020," BofA said in its report.

Commodities were caught in the rotation, with allocations falling to a seven-year low to a net 11% underweight. This comes as a quarter of those surveyed believe gold is overvalued.

Meanwhile, investors are most overweight utilities since 2008. here, with a net 8% excess weight.

"Investors also swung into banks and out of tech in September," BofA said.

Namely, allocations to banks are now at their highest level since February last year, with a net overweight of 12%, while allocations to technology stalled at their lowest level since April 2023, with a net overweight of 3 %.

On a relative basis, investors are now the weakest in tech versus banks since February 2023.

"Improving sentiment in September pushed FMS investor cash levels down to 4.2% from 4.3%," BofA said.

Fund managers continue to show a preference for quality and high-grade, with 66% of respondents believing in high-quality earnings stocks, while 29% say high-grade will outperform high-yield bonds.

In addition, global growth expectations remain pessimistic for fund managers, with 42 percent of the 243 respondents to the September survey expecting a weaker economy. Notably, this turned out to be a modest recovery from August's eight-month low of 47 percent.

However, macro-pessimism was more focused on China, with growth expectations falling to a three-year low as 18% of investors bet on a weaker Chinese economy.

In contrast, the outlook for US growth improved slightly in September, with 51 percent of respondents predicting a weaker US economy over the next 12 months, down from 56 percent in August.

In terms of perceived tail risks, 40 percent of fund managers see a U.S. recession as their biggest concern, while concern about accelerating inflation rose to 18 percent, up from 12 percent.

On the other side of the coin, geopolitical concerns fell to 19 percent from 25 percent.