Investors are running back to cash as they worry about a strong bout of volatility ahead, according to the latest Bank of America Merrill Lynch fund manager survey.
Cash levels have jumped back to 5.8 percent in October, levels not seen since just after the Brexit vote in June, and, before that, in the fall of 2001 just after the Sept. 11 terror attacks, the closely watched survey showed.
The managers most fear the disintegration of the European Union, with 20 percent citing that as the biggest "tail risk," or unlikely occurrence that would have substantial repercussions. The second is a new addition — worries that the bond market will crash, cited by 18 percent.
Finally, the third fear is that Republican Donald Trump will win the presidency. Most polls show the New York billionaire trailing Democrat Hillary Clinton, but there are still three weeks to the election.
For fund managers, the Trump trade is clear: long volatility, short the Mexican peso and short bonds, with volatility by far considered the best bet with 51 percent of respondents.
While portfolio managers say they fear tail events and are moving to cash, the allocation to equities hit a seven-month high while bond allocation fell to a 10-month low.