Just days after Bank of America's equity team joined Goldman, JPM, Citi, UBS and pretty much every other bank (and Gartman) forecasting a market drop in the imminent future with a report laying out “Nine “Reasons To Worry” About A Big Market Drop”, BofA's cross asset team led by chief investment strategist Michael Hartnett is out with some of his own words of “encouragement”, to wit.

If you go down to the woods today… it will be full of bears. Investors positioned for “summer of shocks”: FMS cash levels up from 5.4% to a high 5.5%; only 12% taking “higher-than-normal” risk; most crowded trade “long quality”. Based on FMS positions, contrarians should be moderately long risk via UK, Japan, tech & industrials, and take profits in EM, energy, discretionary.

What Hartnett is referring to is that according to BofA's latest Fund Managers Survey, Investors are positioned for “summer of shocks” with 
cash levels up to a high 5.5%, one of the highest prints since the Lehman failure. 

But what has professional investors so spooked?

For the answer we look at the monthly survey question what FMS respondents believe is the biggest tail risk. Here, surprisingly, we find that after two months of everyone fretting about “quantitative failure”, or the Fed losing control over markets more than anything, this is now only the third biggest concern and there is a new biggest “tail risk” – Brexit, followed in second place by “China devaluations/defaults”, a worry that did not appear on anyone's radar one month ago.

Also curious: the spike in worries about “US politics” (which we are confident will only rise higher in the coming months) and the arrival of a brand new worry: stagflation. Why? Perhaps as we noted in our April 1 post “The Next Big Problem: “Stagflation Is Starting To Show Across The Economy.”