Global fund managers continue to favor U.S. stocks over equity markets around the world, according to Bank of America Merrill Lynch's benchmark monthly survey, even as developments in Washington's trade war with Beijing create the most bearish outlook for the global economy in nearly seven years.

The September edition of BAML's Fund Manager Survey, which polled 244 investment managers who run more than $742 billion worth of assets, also noted that investors have boosted the cash portion of their portfolios to 51.%, the highest in 18 months, and consider a global trade war the biggest "tail risk" for the market for the fourth consecutive month. 

"Investors are holding on to more cash, telling us they are bearish growth and bullish U.S. decoupling," said Michael Hartnett, chief investment strategist at BAML. "Fund managers are signalling that they are starting to price in a hawkish Fed."

Just under half of the survey's participants said that any "decoupling" in the global economy will come from a U.S. slowdown, rather than a "rest of the world" pickup, although a small portion (28%) think growth in Asia and Europe will accelerate.

Even amid that cautious global stance, however, investors still see the outlook for U.S. corporate profits in a bullish light, with a net 69% of the respondents favoring the region over all other markets, the highest in 17 years. At the same time, global fund managers have lifted their 'overweight' on U.S. stocks by 2 percentage points to 21%, the most since January 2015. 

"The U.S. is the most favored equity region globally for the second month running as investors buy growth over value both regionally and sectorally," the survey said.

With 498 of the S&P 500 having reported so far this season, 80.3% have topped expectations, according to Thomson Reuters I/B/E/S data, as collective earnings rise by 24.9%, the best quarter in more than eight years, while third quarter earnings are projected to rise by 21.7% from the same period last year.

Tech stocks remain the favorite trade in the survey, BAML noted, with the so-called "long FAANG+BAT" trade -- a reference to a group of stocks that includes Action Alerts Plus holdings Facebook Inc. (FB - Get Report) , Amazon Inc. (AMZN - Get Report) , Apple Inc. (AAPL - Get Report) as well as Netflix Inc. (NFLX - Get Report) , Google parent Alphabet (GOOGL - Get Report) as well as Asia tech giants Baidu Inc (BIDU - Get Report) , Alibaba Group Holding (BABA - Get Report) and Tencent Holdings Ltd. (TCEHY) -- topping the survey for a eighth consecutive month.

Shorting emerging market stocks is also a popular trade, the survey noted,  with allocations to the sector -- which have fallen 43 percentage points since April -- slipping to a a net 10% underweight.