Confidence in the global economy's ability to expand and companies to boost profits slumped in June, according to a survey of fund managers who look after $701 billion of investors' money.
A net 24 per cent of respondents believed that the world economy would strengthen in the next 12 months, down from 42 per cent in May and 61 per cent in April, the Bank of America Merrill Lynch survey of fund managers found.
Similar concerns were expressed over corporate profits.
A net 28 per cent of respondents believed that profits would improve in the coming 12 months, compared with 47 per cent in May and 67 per cent two months ago, the survey said.
The survey also showed that 38 per cent of fund managers thought equities were undervalued, the highest reading since March 2009.
Still, it showed that fund managers sold energy stocks in record numbers amid news of the oil spill disaster in the Gulf of Mexico.
A net 7 per cent of global asset allocators retained an overweight position on the sector, down from 37 per cent in May, the biggest monthly swing recorded by the survey.
"Broadly, investors have tightened their defensive approach towards equities, moving out of cyclical sectors. Asset allocators are now underweight materials, holding their lowest allocations since March 2009," it said.
Secure dividend sectors including consumer staples benefited, with 15 per cent of respondents overweight on the sector, up from 4 per cent in May.
Allocations towards utilities and pharmaceuticals have also risen.
"Global growth expectations have double-dipped and positioning is more defensive but investors show little sign of panic," Bank of America Merrill Lynch Global Research chief global equities strategist Michael Hartnett said.
A total of 207 fund managers participated in the global survey from 4 to 10 June.
