According to the latest BofA Merrill Lynch February Fund Manager Survey (163 participants with $510BN in AUM responded), active managers finally got reacquainted with gravity and were not happy with the experience, or as BofA puts it, investor anxiety is palpable, “but does not give the all clear to buy the dip.”

Here are the survey highlights:

A record one-month jump in net % of investors indicating they have taken out protection against a sharp fall in equity markets in the next 3 months, at net -30% in February from net -50% in January

Fund managers are rotating into cash and out of equities, reducing risk and cyclicality

Average cash balance rises to 4.7% this month, up from 4.4% in January. To rise in FMS cash rose to 4.7% (avg = 4.5% past 10 years) moves BofA’s FMS Cash Rule back into a contrarian “buy” signal. Meanwhile, BofAML Bull & Bear remains in “sell” at 8.4 with cash not rising sharply enough to cause a drop below the 8.0 “sell” signal threshold.

Allocation to equities fell to net 43% from net 55% overweight, the largest one-month decline in two years; allocation to bonds now at a record low of net 69% underweight

Respondents indicate this S&P bull market will peak on average at 3100

An inflation-induced bond crash (45%) remains at the top of the list of tail risks cited by investors; the top three are rounded out by a policy mistake by the Fed/ECB (18%) and market structure (13%)

Long FAANG+BAT (26%), Short USD (20%) and Short Volatility (18%) are considered the most crowded trades

A majority of investors surveyed (70%) now believe the global economy is in the “late cycle,” the highest level since January, 2008

Only 5% of fund managers surveyed say global interest rates will be lower in the next year; 80% expect them to rise

A record net 24% of investors surveyed say global corporate balance sheets are overleveraged; the net percentage that would like to see companies return cash to shareholders remains close to 2009 lows