Investors have turned bearish in their outlook for the global economy and corporate earnings, according to the BofA Merrill Lynch survey of fund managers for July.

The survey shows a net 12% of respondents predicting the global economy will deteriorate in the coming 12 months, the first negative forecast since February 2009. This represents a big turnaround from June when a net 24% forecast the economy to strengthen.

A net 4% of the panel expects corporate profits to worsen in the coming year, also the first negative outlook in more than a year. It compares with a net 28% forecasting earnings growth just last month. A net 1% said that profit margins will fall in the coming year, compared with a net 31% predicting improved margins in May.

Risk appetite has dipped with investors moving into cash and reducing exposure to cyclical stocks. Cash now comprises 4.4% of an average portfolio, up from 4.1% in May. A net 39% of the panel is taking lower than normal risk, more than double the proportion in May. Allocations towards pharmaceuticals, a classic bear market sector, increased to the highest level since March 2009.

Gary Baker, head of European equities strategy at BofA Merrill Lynch Global Research, said: “July’s survey echoes the sentiment that investors expressed during the recession in early 2009.”

Michael Hartnett, chief global equity strategist at BofA Merrill Lynch Global Research, said: “Growth and profit expectations have double-dipped. Should upcoming data fail to confirm a double-dip, risk assets will have a much better third quarter.”