Global FMS Macro Indicator [1] flips to neutral territory after flashing a buy signal last month.

While FMS Macro conditions continue trending higher, investors have already begun deploying cash; cash levels drop to 4.8% in March from 4.9% in February, but are still higher than the 10-year average of 4.5%.

A record number of investors (net 34%) find equities to be overvalued, the most in 17 years; the US is identified as the most overvalued region (net 81%), while EM equities (net 44%) and Eurozone equities (net 23%) are seen as undervalued.

Investors identify higher interest rates (36%) rather than weaker earnings (21%) as the catalyst most likely to end the 8-year bull market in equities; fear of protectionism (21%) falls sharply from last month’s survey.

Yields remain too low to hurt stocks: 67% of fund managers surveyed say 10-year Treasury yields of 3.5%-4% are needed for an equity bear market.

Fund managers cite European elections raising disintegration risk as the biggest tail risk (33%), closely followed by a trade war (20%) and a crash in global bond markets (18%).

A net 32% of investors think the US dollar is overvalued, the highest proportion since June 2006 ; Long USD is once again seen as the most crowded trade (39%).

Expectations for faster global growth remain high at net 58%; expectations for Chinese growth jump to 11%, the highest level since 2013.

Secular stagnation expectations (below-trend growth and inflation) fall to 5 ½ year lows (34%).

57% of investors surveyed say global profits will improve over the next 12 months, up from February (55%) and near a 7-year high.

Just 10% of investors surveyed expect Congress to pass a tax reform bill before its summer recess begins in August.

“Investor positioning argues for a risk rally pause in March/April, with allocation to equities at a two-year high and bond allocation at a three-year low,” said Michael Hartnett, chief investment strategist. “Policy is the key catalyst for the Icarus trade to fly higher in the coming months.” Ronan Carr, European equity strategist, added: “Investors are positive on European macro and see more value in equities than in the US, but there is a risk of complacency on French elections.”