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Even though the markets have traded sideways for the last 18 months plus, the bull market that started in March of 2009 appears to be on very thin ice, and according to Merrill Lynch, investors are now the most bearish on the stock market since the collapse in 2008 that was brought on by the mortgage and real estate implosion.

A new survey of money managers by Merrill Lynch that run a combined $528 billion in assets, shows that cash levels have been raised to the highest level since 2011, and allocation to stocks have seen the second biggest drop recently in history.

The mere fact that the current bull market is the second longest in history, combined with forward multiples that are well above historical norms is generating nervousness in many investors. The FANG stocks which include Facebook, Amazon, Netflix and Google have driven market performance for years, with this year being no exception, as technology is up 22% versus the S&P 500’s 15%.

The Merrill Lynch report zeroed in on some pretty obvious reasons for the widespread bearishness: The on-going trade wars, the potential for a looming recession, which the inversion in the treasury bond yield curve seems to be indicating, and an overall concern over domestic monetary policy.

With the G-20 meeting coming up, and President Trump relaying via Twitter that he and Chinese President Xi are going to meet to discuss the trade issues, there is a glimmer of hope that some sort or arrangement can be achieved. It has been widely reported that many of the trade issues had been settled upon before China decided to walk back from the agreements, another reason for investor uncertainty to ratchet even higher.

Merrill Lynch strategist Michael Hartnett noted that the fund managers survey allocation is implying recessionary conditions and he also said that “Investors are overweight assets that outperform when interest rates & earnings fall and underweight those positively correlated to rising growth and inflation.”

The report also pointed to the huge rally in the Treasury Bond market, which is considered a safe haven for investors. Yields have plummeted to two year lows and many on Wall Street are saying that the Treasury trade is currently the most crowded trade of all. The survey, which the Merrill Lynch team conducted between June 7 and 13 also showed a rotation into other defensive areas like fixed income, cash, utilities and staples and away from banking, technology and European Union area stocks.

In addition, the surveyed managers also expect the Federal Reserve to cut interest rates, and while they didn’t this week, there is a strong possibility that they will at the next meeting in July, and at the very latest, September.

The portfolio managers also feel that a plunge back to the 2350 range on the S&P 500, which is where the market bottomed in the fourth quarter of 2018, would prompt President Trump to make a deal with China, as the last thing he needs is a stock market debacle with the election coming next year. An on-going trade war ranks as one of the biggest concerns for 56% of the managers that weighed in.

The bottom line for investors is that the fund managers have very valid concerns as the market is fully valued, and we are definitely in the late-cycle economically, and for the stock market. In addition, while improving somewhat, the trade and tariff issues will remain front and center until an agreement is reached. Geopolitical concerns are also on the table as Iran continues an on-going belligerence in the Middle East, and the Brexit issue in the United Kingdom is also a concern.

Finally, as we have noted previously with an election coming, you can count on continued white-hot rhetoric from both political parties. The rhetoric will continue in a nonstop fashion until election day in November of 2020, and regardless of which party you side with, it is another item that will weigh on investors psyche.

Similar to caution here, Goldman Sachs has been far more cautious and even negative on top tech stocks as a whole but still has many bargains it wants its clients buying.