A record number of global fund managers are hedging against a sharp fall in stock markets over the next three months, according to Bank of America Merrill Lynch's monthly survey of investors.
Just over a third of fund managers said they had taken out protection according to the survey, conducted earlier this month as fears over trade wars knocked markets from their highs.
That marks a record high since the bank first started surveying managers over their hedging positions just before the financial crisis.
The big shift came as the prospect of a trade war loomed larger as a risk to stock markets.
A trade war was cited as the biggest risk to markets by 37% of fund managers surveyed, up from 20% last month.
The US and China's tariffs tit-for-tat has derailed a strong rally in stock markets that kicked off at the turn of the year.
After marking fresh all-time highs at the beginning of the month, US markets have lurched lower as US president Donald Trump's raising of tariffs on $200 billion of Chinese exports, and threats to do the same on a further $300 billion, sparked a retaliation from Beijing.
Second in the rankings of risks to stock markets was a slowdown in the Chinese economy, cited by 16% of managers, while a further 12% pointed to US politics.
Just 5% of managers expect global growth to weaken over the next year, with two-thirds not expecting a global recession until the second half of 2020 or later.
Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, said: ‘Investors are well-hedged but not positioned for a breakdown in trade talks.
‘Investors see little reason to "buy in May" unless the 3Cs – credit, the consumer, and China – quickly surprise to the upside.’
Fears over a trade war have spilled over into fund managers' positioning in commodities, which have slumped to a net 8% underweight, amid worries over the impact on top consumer China.
The Fed's increasingly dovish stance, which has done much to spur the global stock market rally since the turn of the year, has also spurred more bond buying. Fund managers are a net 34% underweight fixed income, which nevertheless marks a seven-year high.
Brexit fears meanwhile continue to ensure the UK remains the least favourite region for equity investors, polling at a net 28% underweight.