Things appear to be looking up for the US, at least when it comes to investor sentiment. For the first time since November 2001, the US has emerged as the most preferred global equity market of fund managers polled by Merrill Lynch.

The confidence in US equities is likely a reflection of valuations, with the Dow Jones Industrial Average down around 3% so far this year and still trading below the psychologically important level of 13,000. After all, expectations of fundamentals have not improved significantly. A net 62% expect global corporate profits to deteriorate over the next 12 months.

The latest Merill Lynch survey of global fund managers shows that they are also overweight in global emerging markets and underweight elsewhere, especially in the Eurozone. Sector-wise, the global fund managers favour consumer discretionaries, energy, and telecommunications; they are most bearish about utilities, financials, and materials.

Cash positions are still high and risk aversion persists, but the levels are not as dire as last month. A net 24% of the respondents are overweight on cash, significantly lower than the net 42% in March, which was the highest level since the poll was launched in 2001.

The average cash position of the respondents this month is 4.2%, down from 4.9% in March. Merrill Lynch, which conducts the survey through research group Taylor Nelson Sofres, measures net responses by taking the balance between the bullish and bearish views for each survey question.

Fund managers that invest in global emerging markets û as opposed to those who invest in both developed and emerging markets û are not as pessimistic as they were last month. A net 67% expect corporate profits to slip over the next 12 months, down from a record net 77% in March.

For the third straight month, Asia is the least preferred emerging market among the global emerging market fund managers. February was the first time Asia fell out of favour among global emerging market fund managers surveyed by Merrill Lynch. The Europe, Middle East and Africa (EMEA) market is now their most preferred market.

Global emerging market fund managers are most bullish about Russia, Brazil, Thailand and Turkey and most bearish about Chile, South Africa, Poland, Taiwan, and India. They are most overweight on consumer discretionaries, energy, and telecommunications; and most underweight on utilities, financials and materials.