>Cash has left the building (MERRILL LYNCH)

■ Bullish on equities, but no euphoria
The October FMS shows equities remain in a sweet spot: investors believe double-dip risks are receding, inflation is distant and risk appetite is rising (to +44 from +40). But bullishness is still not euphoric: the equity overweight (+38%) is below danger levels (+50-55%), hedge fund’s net exposure remains low and investors remain stubbornly underweight global banks.

■ New highs for profit expectations
Two-thirds of investors view a double-dip recession as unlikely (vs. 47% last month). But two thirds also expect growth and inflation to be "below-trend". With inflation and interest rates low, a net 72% expect higher corporate profits, the most bullish reading on profits since December 2003.

■ Cash has left the building
The lack of a September correction (and perhaps also large corporate issuance) has forced investors to sharply cut cash balances from 4.1% in September to 3.7% in October. Asset allocators cut cash to 7% UW, the lowest cash allocation in 5 years. This benefited equities: the net % OW rose from 27% to +38%.

■ Europe rising from the ashes
Investors remain OW Emerging Markets. But Europe is the favoured developed market. 11% of asset allocators are OW, a massive shift from -40% in March. A net 30% of global PMs view EU as the most undervalued region. In contrast, panellists are giving up on Japan fuelled by perception of ¥ overvaluation.

■ Investors are still UW global banks
Despite strong performance in recent months investors turned more bearish on global banks in October. Technology remains the favoured global sector; while positioning in energy, industrials and materials all increased at the expense of consumer sectors, with discretionary now the least loved global sector.

■ Dollar sentiment cracks but yet to plumb '08 lows
A net 20% of investors see the $ as undervalued, a sharp drop from September but a long way from the 50% undervalued readings of spring 2008. In contrast readings on yen overvaluation are extreme by historic standards and suggest Bank of Japan currency intervention would have some success.

■ Pain trades galore
For uber-contrarians the October FMS offers the following trades: long T-bills, short EM equities; long Japan, short EM or EU equities; long consumer disc., short materials; long utilities, short tech; long UK, short EU equities.

To read the full report: MANAGER SURVEY