Investors Think The Biggest Existential Threat To Markets Today Is Way Different Than What It Was In 2008

The way investors think (and position themselves) with regard to potential big risks to the market has come a long way since the financial crisis.

According to a survey of 222 fund managers responsible for a collective $591 billion in assets under management conducted by BofA Merrill Lynch between February 7 and February 13, investors now believe emerging markets present the biggest risk to global financial stability.

Meanwhile, concerns about counterparty credit and default risk - a defining characteristic of the financial crisis - are practically nonexistent.

"5 years ago, EM was 'safe' - banks were 'toxic'," says Michael Hartnett, chief investment strategist at BofAML.

"In a complete reversal, EM is now the biggest risk to financial market stability, while DM counterparty and default risk is seen as minimal."

In line with this thinking, fund managers have increased their portfolio allocations to global bank stocks to the highest level on record, according to the survey results. Meanwhile, allocations to emerging markets have fallen to the lowest level on record.

The charts below show how positioning has evolved.