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Market Preview: Who's Afraid of the Fiscal Cliff?

NEW YORK ( TheStreet) -- Halfway through October, just two weeks away from Halloween, the evidence is in on what's spooking fund managers these days.

No, it's not earnings season (though Tuesday's late headlines on Intel (INTC - Get Report) and IBM (IBM - Get Report) may change that); it's the oh so scary prospect of going over the fiscal cliff!

That's the biggest takeaway from the latest Bank of America Merrill Lynch fund manager survey, which involved an overall total of 269 panelists with roughly $734 billion in assets under management queried between Oct. 5-11.

A whopping 72% of those polled said they believed the fiscal cliff, which refers to the looming expiration of Bush-era tax cuts and other stimulus programs at the start of 2013, is "not substantially priced into global equities and macroeconomic data."

Forty-two percent of respondents identified the cliff as the no. 1 tail risk for the market, up from 35% in September and 26% in August.

Fear not though, this overwhelming worry about the very same issue hasn't manifested itself in less faith in stocks. In fact, the survey found a net 24 percent of asset allocators are overweight equities, up from a net 15 percent in September.

"While the U.S. fiscal cliff is a hurdle, growing belief in the global economy could spur a more 'risk on' stance from investors," said Michael Hartnett, chief investment strategist at B of A Merrill Lynch Global Research, in a press release.

In accompanying research, B of A delved deeper into what sectors are getting the most love when it comes to equities and unearthed an interest factoid involving a status that it says U.S. banks haven't been afforded in more than six years.

"October's big OW's overweights are Tech and Pharma; the big UW's underweights are Banks and Utilities," the firm said. "Relative to the past decade, investors are very long US domestic demand plays (e.g. consumer discretionary) and very short China-plays (e.g. Energy and Materials). Global banks are out of favor, but US investors are OW US banks for first time since 8/2006."

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