Twelve percent more fund managers surveyed this month by Bank of America Merrill Lynch forecast that the global economy will deteriorate in the next 12 months, than said the economy would grow. Last month, the net result of the survey was that, on balance, 24% more fund managers predicted the global economy would pick up steam, than lose it.

In the latest survey, a net 4% of the panel expects corporate profits to worsen in the coming year. This even as the stock market surged Wednesday, on better than expected earnings.

In the BoA Merrill Lynch survey, a net 1% of fund managers said that profit margins will fall in the coming year. To put that in perspective, in May, a net 31% predicted improved margins.

Cash now comprises 4.4% of an average portfolio, edging up a bit from 4.1% in May. A net 39% of the panel is taking lower than normal risk, more than double the proportion in May.

Allocations have moved toward pharmaceuticals, a classic bear market sector, BoA said.

"July's survey echoes the sentiment that investors expressed during the recession in early 2009," said Gary Baker, head of European equities strategy at BoA Merrill Lynch Global Research.

"Growth and profit expectations have double-dipped. Should upcoming data fail to confirm a double-dip, risk assets will have a much better third quarter," said Michael Hartnett, chief global equity strategist at BoA Merrill Lynch Global Research.

According to the survey, managers are more concerned about the outlook for U.S. equities than at any point since November 2006, with a net 14% of the panel saying it is the region they would most like to move out of. In June a net 14% said the U.S. was the region they most wanted to overweight. Global asset allocators have already reduced exposure to the region, with net 7% of panel overweight U.S. equities, down from a net 20% in June.

And contrary to other reports, the BoA Merrill Lynch survey found that emerging market are now gaining favor.

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