Fund Managers Are Bullish but Wary

The balance of managers who are overweight equities is as high as it was in the spring of last year, Bowers notes.

Awkward thought: Wasn't that just before markets tanked? Long-time market observers will have learned the hard way that when institutional investors get really bullish, you might want to mind your eye.

"Passions are running highest for eurozone equities," Bowers says, "where the net overweight position is the most positive in 18 months. Among global sectors, investors have 'the hots' for technology, insurance and industrials, while utilities are still shunned on valuation grounds. Global pharmaceuticals are once again the sector that is perceived as most undervalued. Outside of traditional assets, investors are underweight commodities, neutral property and overweight 'alternative investments' such as hedge funds and private equity."

But the inflation fears are the sting in the tail. The percentage of fund managers expecting cuts in short-term interest rates over the next year has plunged to just 25%, from 39% as recently as December. Slightly more than half, 51%, actually expect a rise. That's up from just 36% two months ago.

And a clear majority expect long-term rates to rise as well. The bulk of money managers continue to warn that the bond market overall is overvalued, as they have for several years.