Investors have regained some faith in equities, with a net 46 per cent saying they are overweight the asset class compared to 33 per cent in February, according to the Bank of America Merrill Lynch Fund Manager Survey for March.

After a bullish start to the year, followed by a dip in confidence in February, equity markets are in a phase of consolidation, said Gary Baker, head of European equities strategy at the bank’s research division.

Regionally, there is a very clear rotation out of the UK and euro-zone and into the US. A net 21 per cent of investors are underweight European equities this month, compared with a net 2 per cent overweight in January. Meanwhile a net 19 per cent are overweight US equities, compared with a net 1 per cent in January.

Japan has also risen in popularity, with a net 6 per cent of allocators overweight Japanese equities – the most bullish reading on this asset class since August 2007.

However cheaper valuations of European stocks have caused European investors to move into the asset class, and reduce cash balances accordingly: the net percentage of European investors overweight cash has fallen from 26 per cent in February to 9 per cent in March.

Investors on both sides of the Atlantic are more optimistic on corporate earnings than the macro environment. A net 60 per cent and 72 per cent predict improved earnings over the next 12 months in Europe and the US respectively, while only a net 45 per cent in Europe and 43 per cent in the US forecast their country’s economy to grow over the same period.

This marks a deterioration in macro forecasts since February, which has fed through to a noticeable reduction in inflation worries. The net percentage of global investors expecting an increase in inflation over the next year has fallen consecutively, from 61 per cent in January, to 46 per cent in February, and now stands at 34 per cent.

Consequently, expectations about central bank rate hikes are being pushed back. In Europe, 85 per cent of respondents ruled out a rate increase by the European Central Bank before the fourth quarter of this year.

At a sector level, European investors have increased their exposure to cyclical stocks, such as basic resources and construction, and reduced their underweight position on banks. US investors have also increased exposure to cyclicals, but have increased their underweight position on banks.