Professional investors are heading for cover, making the rush into government bonds the most-crowded trade in the latest Bank of America Merrill Lynch Fund Manager Survey. The move marks the first time investor preference for Treasurys has topped the list, in a portion of the closely watched survey that goes back to late 2013. U.S. government bonds, cited by 27% of respondents, pushed the long-popular technology trade out of first place. Tech (26%) slid to second, followed by long U.S. dollar(18%) and short European stocks (9%). The move is part of a larger trend that saw the survey's 179 participants move away from risk and toward positions that reflect fear of a coming economic slowdown spurred by a spreading trade war. The survey took place from June 7-13, so it reflects the period after some high-profile sparring between the U.S. and Mexico that stirred fears of another front in the tariff battle.

In terms of positioning, investors moved to cash at numbers not seen since the U.S. debt ceiling standoff eight years ago. They shed positions in global stocks to their lowest allocation since the financial crisis bottom in March 2009, and increased bond allocations to an overweight level not seen since September 2011. As earnings season approaches, expectations for corporate profits plunged 40 percentage points, with a net 41% now expecting deterioration over the next year. That is the biggest one-month plunge in the 23-year history of the fund manager survey. On the economy, expectations for growth tumbled by a record 46 percentage points, with 50% of respondents on net expecting growth to weaken in the next 12 months. Survey respondents "have not been this bearish since the Global Financial Crisis, with pessimism driven by trade war and recession concerns" Michael Hartnett, chief investment strategist at BofAML, said in a statement. "The tactical 'pain trade' is higher yields and higher stocks, particularly if the Fed cuts rates on Wednesday."

Positioning for the Fed