(Bloomberg) — Investors are the most underweight on US equities since 2005 as improving market sentiment sends them flocking toward cheaper regions, according to Bank of America Corp.’s global fund manager survey.Most Read from BloombergParticipants in the January poll were “a lot less bearish” than in the fourth quarter, sparking a rotation to emerging markets, Europe and cyclical stocks, and away from pharmaceuticals, technology and the US, strategists led by Michael Hartnett wrote in a note. Allocation to US equities “collapsed” during the first month of 2023, with investors a net 39% underweight the asset class, they said, exceeding even the UK’s 15%.Both investors and some top strategists are warming to stocks globally amid optimism over cooling inflation and China’s reopening, with Hartnett saying “buy the world” earlier this month. European shares are extending their biggest outperformance on record versus the US amid cheap valuations, while emerging markets have outpaced the S&P 500 this year, entering a bull market following a rally in Chinese shares.To be sure, fund managers remain underweight global stocks overall in light of persisting risks to economic growth. They’re overweight cash and bonds with prospects of peaking inflation driving up expectations for lower short-term rates, the survey showed.Participants also said monetary policy is too restrictive for the first time since March 2020. They expect Federal Reserve rates to peak at 5% in the second quarter.Even though a net 50% of respondents expect a weaker economy in the next 12 months, that’s the least bearish outlook on global growth prospects in a year as concerns about a recession fade due to China’s dismissal of its zero Covid policy.Story continuesA total of 253 fund managers with $710 billion under management participated in the global survey, which was conducted from Jan. 6 to 12.Other highlights include:Most crowded trades: long US dollar, long ESG assets, long China equities, long oil, long US Treasuries and long investment-grade bondsBiggest tail risks are inflation remaining high, a deep global recession and central banks staying hawkishUS shadow banking, China real estate and European sovereign debt are the most likely sources of a credit eventCash levels declined to 5.3% from 5.9%, the biggest drop since June 2020Most Read from Bloomberg Businessweek©2023 Bloomberg L.P.