Risks of a global recession hit their highest since August 2009, as investor morale was dampened by sluggish global growth and heightened trade and political uncertainties, according to a Bank of America Merrill Lynch’s (BAML) survey.

A global recession over the next year was expected by around 38% of investors polled in the BAML’s fund manager survey for September, against 59% who viewed a recession as unlikely.

This marked an increase from the August poll, in which 34% of fund managers expected recession, the biggest figure since October 2011.

Investor cash levels dropped to 4.7%, below the recent high of 5.7% last June, but still above the 10-year average of 4.6%, the bank said.

However, surveyed investors have not signalled yet a shift to “value” assets, remaining overweight on investments that outperform during times of low growth figures and rates.

Expectations that value stocks would outperform growth during the 12 months ahead accounted for only 7% of the responses, BAML said.

Investor allocation to equities rose by eight percentage points in September, with allocations to US equities climbing by 15 points to 17% overweight, despite recent soft economic figures.

Bond allocation dropped by 14 percentage points to a net 36% underweight, having hit the highest level since September 2011 last August.

“We remain contrarian bullish, as this month investors have shown only a modest improvement in risk appetite,” BAML’s chief investment strategist Michael Hartnett said.

Source: Mubasher

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