Fund managers are downbeat on the prospects for global growth, but believe the stock market rally still has further to run, according to the latest survey from Bank of America Merrill Lynch.

May's instalment of the monthly poll of professional investors showed deteriorating confidence in global growth, with just a net 1% of investors saying they expected the economy to strengthen over the next 12 months, the lowest level since February 2016.

Coupled with this, fund managers are still holding high cash balances. Although this has ticked down from 5% in April to 4.9% in May, it is still above the 10-year average of 4.5%.

But the vast majority of managers believe the stock market rally has further to run, with 80% saying equities are yet to peak. Neither do they believe a recession is imminent, with just 2% expecting one this year. The consensus is for a downturn either next year or in 2020.

Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, said the latest survey ‘presents good and bad news’.

‘Although cash levels remain high and growth optimism is at the lowest level in over two years, a majority of investors say there is room to grow in this equity bull market and don’t see signs of recession anything soon,’ he said.

‘Fund managers think the May rally can extend in the near-term.’

Managers have meanwhile piled into the commodities rally, running their highest weighting to the asset class since April 2012, when crude oil was trading at $105 a barrel. The oil price is up around 18% so far this year, with the latest leg of its rally sparked by US president Donald Trump's reimposing of sanctions on Iran.

Hawkish policy mistakes from the US Federal Reserve and European Central Bank are the top concern for 30% of managers. Second to this is the prospect of trade wars, the biggest worry for 25%, although this has eased.

Fund managers have continued to buy banks while ditching utilities, with allocation to the former rising to a net 36% overweight, the highest level on record.

They also favour technology and energy but have been avoiding consumer staples, telecommunications and utilities.