Bulls Have Pulled Back but Haven't Left the Arena: Merrill

Only 13% of investors said a recession was in the offing, and a mere 18% said equities had already peaked. Forty percent expected a peak in the second half of this year, while 39% said equities would not peak until 2019 or later.

"The bulls have been silenced but not defeated, evidenced by increased cash allocations and low expectations of global growth and profits," Michael Hartnett, Merrill's chief investment strategist, said in a statement. "But true bull capitulation is absent, with most investors saying the peak in the stock market is still to come."

Thirty-eight percent of investors put the threat of a trade war at the top of their list of tail risks. Twenty-two percent cited a hawkish policy mistake by the U.S. Federal Reserve/European Central Bank, and 10% were most concerned that the market structure would lead to illiquidity.

Higher inflation remained the consensus view, with net 82% of investors in the survey expecting the core Consumer Price Index to rise over the next 12 months.

Long FAANG (Facebook, Apple, Amazon, Netflix and Google's parent Alphabet) + BAT (Baidu, Alibaba and Tencent) remained the most crowded trade for the third straight month, cited by 33% of investors. Twenty-one percent said it was short U.S. dollar, while 11% said long corporate bonds.

The New York Times reported March 29 that Facebook's dramatic plunge in the wake of the data harvesting debacle had spooked investors in the other four FAANGs as well as in Twitter and other social media and internet stocks with high multiples.

Merrill noted that although investors have been overweight tech for more than a decade of fund manager survey history, they are worried about aggressive "occupy Silicon Valley" policies that may come from Capitol Hill.

Sixty-four percent of respondents in the latest poll said they would move to underweight tech if antitrust, tax and privacy regulations were ratcheted up.

— Check out Investors Hold More Cash, Fewer Stocks in February: Merrill on ThinkAdvisor.