(Reuters) – Global investors’ equity allocations fell 6 percentage points in May and over a third of fund managers have taken out protection against sharp stock market falls in coming months, Bank of America Merrill Lynch’s latest monthly survey found on Tuesday.

The proportion of investors preparing for equity falls is the highest in the survey’s history, BAML said, noting that trade war was seen as the main risk by 37% of participants, followed by a Chinese slowdown which was picked by 16%.

The survey of funds managing close to $687 billion was conducted May 3-9 just as Sino-U.S. trade talks turned acrimonious. The proportion of funds naming trade war as the biggest risk rose by 17 percentage points over last month, and latest developments appear to have vindicated their fears.

President Donald Trump on Friday carried out his threat to hike tariffs on an additional $250 billion of Chinese goods.

China’s decision on Monday to slap on tit-for-tat tariffs sent global equities into their worst one-day fall this year.

(For a graphic on ‘FMS survey’s biggest tail risk’ click tmsnrt.rs/2WFpsgd)

A record 34% of investors had bought portfolio hedges, BAML said, adding that allocation to safe-haven cash had risen seven percentage points to a net 33% overweight.

(For a graphic on ‘Over 1/3 of funds hedged against stock market fall’ click tmsnrt.rs/2LFVW9b)

“(Investors) are well-hedged but not positioned for a breakdown in trade talks,” Michael Hartnett, chief investment strategist told clients. “Investors see little reason to ‘buy in May’ unless the 3Cs – credit, the consumer, and China – quickly surprise to the upside.”

The survey found the overall net equity overweight had dropped to just 11%, while a net 34% were underweight on bonds, the highest in seven years. Emerging markets were the most preferred equity class with a net 34% overweight, while the least favoured was the UK with a net 28% underweight.

U.S. tech stocks were named the most crowded trade, displacing short European shares for the first time since November 2018. The change came as eurozone equity allocations jumped nine percentage points to a 9% overweight – well off seven-year lows hit in January.

BAML said the “intention to own” European stocks had risen to the highest level since last May “amid greater economic confidence, despite heightened trade war risk.”

Long U.S. dollar and long emerging markets were the third and fourth most crowded trades respectively.

In keeping with the worries over global economic growth, allocation to commodities slumped 11 percentage points to a net 8% underweight, BAML said.