Fund managers holding onto hope - and cash

Fund managers are hopeful, but still aren't giving up their cash, according to the latest survey from Merrill Lynch. The survey found 35 percent of managers expect long-term interest rates to rise in the next 12 months, up from 10 percent last month. The average cash balance, however, is down only slightly from 5.5 percent in December, to 5.3 percent.

"Investors are talking a more positive story, especially with regards to the U.S., but the fear factor remains," Gary Baker, Banc of America Securities-Merrill Lynch head of EMEA equity strategy, said in a press release. "They have firepower to act, but are unconvinced by the modest recent equity rally, suggesting it is a bear market rally in both sentiment and markets. Global sector allocations remain resolutely defensive."