* BAML survey shows stock allocations at highest in two years
* Bond allocations fall to a four-year low
* Investors most overweight equities versus govt bonds since 2014
LONDON, Jan 16 (Reuters) - Investors have raised their stock allocations to two-year highs and cut cash positions to five-year lows, with a majority expecting the equity bull run to continue into 2019, a survey by Bank of America Merrill Lynch (BAML) showed on Tuesday.
The global survey, which covers 183 participants with $526 billion under management, was conducted from Jan. 5 to 11, when world stocks recorded their strongest start to a year since 2010.
In the bank's previous survey, the majority of respondents expected equity markets to peak in the second quarter of 2018. That forecast has now been pushed back to 2019 or beyond.
"Investors continue to favor equities," said Michael Hartnett, chief investment strategist at BAML. "By the end of Q1, we expect peak positioning to combine with peak profits and policy to create a spike in volatility."
Investor allocations to stocks jumped to a two-year high of a net 55 percent overweight, while bond allocations fell to a four-year low of a net 67 percent underweight.
BAML noted that investors were at their most overweight equities versus government bonds since August 2014.
The average cash balance also fell to 4.4 percent, a five-year low, from 4.7 percent in December.
The upbeat mood was reflected in investors' outlook for corporates, with profit expectations climbing 10 percentage points to 44 percent in January.
Inflation and/or a crash in global bond markets was cited as the biggest tail risk, chosen by 36 percent of respondents, while 19 percent opted for a policy mistake by the U.S. Federal Reserve or European Central Bank.
A net 11 percent of investors surveyed expected the U.S. yield curve to flatten in 2018, the highest level in over two years, the bank noted. A net 9 percent of investors also thought that fiscal policy was too easy, the highest since 2011.
In terms of regional appetite, the eurozone remained in favor with the equity allocation holding at a net 45 percent overweight. The emerging market equity allocation also climbed to a net 41 percent overweight, from 34 percent in December.
But pessimism towards UK equities continued as Brexit uncertainty continued to weigh, with a net 36 percent underweight, back near its post global financial crisis era lows.
"The UK remains the consensus short amongst fund managers," BAML said. (Reporting by Claire Milhench and Marc Jones; Editing by Hugh Lawson)