Investors have regained confidence in the global economic outlook following resolution of the U.S. debt crisis, according to the BofA Merrill Lynch Fund Manager Survey for November.

A net 67% of respondents now expect the world’s economy to strengthen over the next 12 months—up 13 percentage points from October—now that the Washington crisis is behind us.

An important new question was added to this year's survey, which asked investors when the U.S. Federal Reserve will begin “tapering” its bond purchases—a signal that the central bank views economic conditions as robust enough to lessen its support. Forty-eight percent see this happening in March while 18% expect it in the second quarter of 2014.

The inclusion of a second new question asked investors about the likeliest catalyst for the global economy reaching “escape velocity” (a virtuous cycle of growth) in 2014. Almost a third of the respondents said growth in bank lending in the G7 economies (31%), followed by acceleration in the Chinese and Asian economies (26%).

Investors increased their equity allocations slightly during the month to a net 52% overweight, while also upping their underweight in bonds. The biggest shift was into global emerging markets equities, where they returned to a net overweight, while strong overweights in Eurozone and Japanese stocks were moderated slightly.

Surprisingly, a small net majority of asset allocators now see equities as being overvalued.

March 2004 was the last time such a reading was taken but regionally, Europe is still considerably undervalued compared to the U.S. It was accompanied by cash holdings rising to 4.6%.

“Investors remain reluctant bulls. Who would have thought all-time highs in U.S. stock prices would coincide with high cash levels?” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research in a statement. “Conviction is still low in Europe. More portfolio managers expect EPS to grow, but fewer see it reaching double-digit levels,” added John Bilton, European investment strategist in a statement.

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