The survey also saw asset allocators assigning the most funds to stocks since February, 2011, and they cut cash holdings to 3.8 percent form 4.2 percent in December. The firm said investors' appetite for risk in their portfolios is now at a nine-year high. While BofA does not see this shift yet representing a contrarian sell signal, it also noted that an increasing number of the fund managers see stocks as undervalued, particularly in Europe. (Read More:
First Shots Fired in Global 'Currency War'
"Following the resolution of the U.S. fiscal cliff, sentiment has surged. Half of investors now tell us that they would sell government bonds to buy higher–beta stocks, which his consistent with increasing growth and inflation expectations and with our call for a 'Great Rotation' to start in 2013," said chief investment strategist Michael Hartnett, in a news release.
The surveyed group also became much more confident about the global economy in just a month's time. A net 59 percent now expect the global economy to strengthen this year, compared to a net 40 percent last month, the most positive outlook since April, 2010. (Read More:
Stocks Looking Beyond Debt Ceiling, for Now
The biggest concern for markets continues to be the U.S. fiscal crisis, but that concerned has waned in the last two months, BofA Merrill said. The group was surveyed between Jan. 4 and Jan. 10.