Investor cash positions are at the lowest level since January 2004 as optimism on the prospect for economic recovery continues to mount, according to a survey of fund managers in a Bank of America Merrill Lynch global research report. While 65% of respondents believe a global recession is unlikely in the next 12 months, an increase from 47% a month ago, others warn the threat of a double-dip recession still looms. The Mortgage Bankers Association (MBA) believes economic growth will continue in 2009, but will slow during the first half of 2010. MBA projects unemployment will peak at 10.2% mid-year, before moderating on the heels of sustainable growth during H210. The fund managers surveyed by BofA Merrill Lynch reported an increase in movement of cash into equities, noting an increase in risk appetite and a belief held by 72% of respondents that the outlook for corporate profits will improve in the next year. “Equities remain in a sweet spot: fears of a double-dip have receded, while worries about inflation and monetary tightening are not imminent enough to prevent an October surge in risk appetite,” said Michael Hartnett, chief global equity strategist at BofA Merrill Lynch global research. But as the recession appears to be over, MBA said, its effects will linger, noting recovery is in the hands of the consumer. “The large losses of consumer wealth in the form of unemployment, reduced employment and the fear of unemployment have constrained consumer spending,” said Jay Brinkmann, MBA chief economist and senior vice president for research and economics. “Timing of the economic recovery is very much tied to the growth in consumer spending.” Investor optimism in the BofA Merrill Lynch survey is worldwide. The percentage of managers who believe global corporate profits will post double-digit earnings increase to 39% in October, up from 25% in September and 30% of global portfolio managers said eurozone equities as undervalued relative to other regions, the highest reading since April 2001. “Europe is emerging phoenix-like from the ashes as confidence in its banks boosts overall confidence in European equities,” said Gary Baker, head of European equity strategy at BofA Merrill Lynch Global Research. Belief that the Chinese economy is set to recover is also strong, as 49% of respondents believe China’s economy will strengthen during the next year, up from 35% in September. But all is not well in Asia, as 20% of respondents viewed Japan as the least attractive region for investment during the next 12 months, led by a believe of 34% of those surveyed that the yen is overvalued, an increase from 21% of respondents last month. As for the US dollar, 20% of respondents believe it is undervalued, compared to 1% in September. “Confidence in Chinese growth has rebounded but worries over a U.S. dollar crisis are on the rise. The dollar is seen as undervalued and the yen as very overvalued, suggesting that central bank intervention in currency markets in coming months could soon prove successful," Hartnett said. Write to Austin Kilgore.