The recent stock market slide may look bad, but it wasn't bad enough to indicate that the damage has been completely done, according to Bank of America Merrill Lynch.
Even after a day when the Dow industrials lost 602 points and as the Nasdaq tech barometer remains in correction territory, indications of a bottom remain elusive, the bank said in its latest survey of professional investors.
"We remain bearish, as investor positioning does not yet signal 'The Big Low' in asset markets," Michael Hartnett, BofAML's chief investment strategist, said in a statement.
A decline that began in mid-October continues to chip away at the market and rattle some nerves. In such cases, Wall Street strategists look for signs that sellers are exhausted and the market has reached sufficiently low levels as to indicate a bottom.
However, the November BofAML fund manager survey actually indicates some optimism.
U.S. stocks remain the most-favored region among respondents, with allocations climbing 10 percentage points to a net 14 percent overweight. Cash balances tumbled from 5.1 percent of portfolios to 4.7 percent, indicating that investors stepped in and bought when the market sold off. The survey showed that during October investors also increased exposure to emerging market stocks, real estate investment trusts and health care.
Allocations to global tech stocks fell to the lowest level since February 2009, though there were "ominously no signs" of a switch to value stocks, the survey said.
Respondents said they see the peaking at 3,056 in the current cycle, a 12 percent rise from Monday's close. Nearly one in three investors think the market has peaked.
There are worries, though, about the landscape in the U.S. and abroad.
A net 44 percent of respondents see global growth decelerating over the next year, representing the worst outlook since November 2008. As part of that, a net 54 percent see China slowing down, which is the highest level of pessimism in two years. Global earnings growth expectations are at their lowest levels since June 2012.
Despite the current high allocation to U.S. stocks, investors are indicating the gains will be short-lived. The survey showed that 45 percent of investors believe non-U.S. equities will be the best performers in 2019, while just 17 percent point to the S&P 500 and 15 percent like commodities. Worst performers likely will be corporate and government bonds, according to respondents, while the S&P 500 ranked third on that list as well.
Investors continue to cite the trade war as the biggest risk, though they also are concerned about interest rate hikes from the Fed and rising levels of corporate debt.